Journal of Statistical and Econometric Methods

Revisiting Wagner’s Law for Selected African Countries: A Frequency Domain Causality Analysis

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  • Abstract

    This study examines the causal relationship between government expenditure and economic growth and tests the validity of Wagner’s Law for ten African countries. Wagner’s law hypothesizes that there is a one-way causality running from national income to government expenditure. We employ Granger causality tests in the frequency domain which allows us to distinguish short, medium and long run causality. The empirical results show that Wagner’s law holds for Cameroon only in the medium term, for Ghana in the short, medium and long terms and for Nigeria in the long-run. The opposite view is supported for Gabon and Senegal in the short, medium and long run, and for South Africa both in the medium and short run. There is bidirectional causality between government expenditure and income for Burkina Faso over the short, medium and long run.