The relationship of government spending to economic growth in Algeria during the period 1967-2021 - The validity of Keynes' hypothesis or Wagner's law

Abstract

The study aimed to test the extent and knowledge of the direction and nature of the relationship between government spending and economic growth in Algeria during the period between 1967-2021, and thus to test the extent to which the relationship corresponds to Wagner's law on the one hand or Keynes' hypothesis on the other hand. The cointegration test was relied upon to reveal the existence of a cointegration relationship between the variables of the study, and the Todayamamoto causation was used to determine the direction of the relationship between government spending and economic growth in Algeria and which of them causes the other to occur. The results of the Johanson test showed that there is a long-term equilibrium relationship between government spending and economic growth during the period studied, the results of the Toda-Yamamoto causality test (TYDL) also indicated that there is a reciprocal causal relationship between government spending and economic growth in Algeria. In other words, government spending causes economic growth, and vice versa, and this confirms that both Wagner's law and Keynes' hypothesis are valid for studying the relationship between government spending and economic growth in Algeria during the period 1967-2021.