Public Spending and Growth in the Countries of the Economic Community of West African States

Abstract

Our research focuses on the impact of government spending on economic growth in the countries of the Economic Community of West African States (ECOWAS). It draws on new theories of endogenous growth, and more specifically on Rajhi model. After the tests of specification, an ARDL model was estimated for each of the countries which have cointegration relationships. For those whose cointegration relationship does not exist, a VAR estimate was made. So according to estimates, Total Public Spending in most of the countries of ECOWAS has not positive influence on the economic growth as well in the short term as in the long term. Also in most of the countries, Public Consumption did not positively affect economic growth as well in the long run as in the short run. Regarding Public Investment, we have the same results; it does not positively affects economic growth in most of the ECOWAS countries. Burkina Faso, Guinea and Ivory Coast are the three excepted countries where Total Public Spending has a positive effect on GDP growth in the long term but not in the short run. For further analysis we looked at Public Consumption and Public Investment. It is only in four out of ten countries of the sample that, we found that Public Consumption expenditures positively affect economic growth in the short term while the impact generally is negative in the long term. Regarding Public investment, it is only in three out of ten countries (Burkina Faso, Cote d’Ivoire, Ghana), that it was found determinant to economic growth in the long term.