| dc.description.abstract | This study examine
d
the relationship between the growth
in
Total Government
Expenditure and GDP growth in Kenya
and
test
ed
the applicability of Wagner’s law
using time series data
for the period 1960
-
2011
. The study utilize
d
C
ointegration
and
VECM techniques
.
Firstly,
the study
investigated the existence
or otherwise of
the long
-
run
equilibrium
relationship between the
two
variables by utilizing
Johansen
-
Juselius Maximum
Likelih
ood Test (commonly referred to as the Johansen
Cointegration Test). The results of Johansen Cointegration Test
indicated the
presence of
a
long
-
run
equilibrium
relationship between
Real
Total Government
Expenditure and
Real
GDP in Kenya during the period under review.
Secondly,
the
study sought to esta
blish
the direction of causality between
the two variables.
To
establish the causality direction, the study utilized the Vector Error Correction
Model (VECM). The results of the VECM indicated that there exists a long
-
run
causality running from
Real
GDP to
Real
Total Government Expenditure.
T
he VECM
results
also
revealed that there exists no short
–
run causality running in either
direction.
Finally, the study
examine
d
the nature of the elasticity of
Real
Total
Government Expenditure
with respect
to Real
GDP.
VECM
results
were utilized
to
identify the
parameters of the
cointegrating
equation (
ce).
The coefficient of the
explanatory variable (GDP) in the cointegrating equation (ce) revealed that the
elasticity of
Real
Total Government Expenditure with respect t
o
Real
GDP is more
than unity.
T
he
results of Johansen Cointegration Test, the VECM and the nature of
the
elasticity
of
Real
Total Government Expenditure with respect to
Real
GDP
validate
d
Wagner’s law for
Kenya
during the period under review | en_US |
