Does there exist an optimal budget balance to improve economic growth? empirical evidence from Asian countries

Figures & data

Figure 1. Trend of budget balancing and GDP growth rate in Asia countries.

Table 1. Variables in the research model (1) and (2)

Variable	Abb.	Measurement	Period	Source	Previous studies
Dependent variable
Economic growth	gdp	Real GDP increase rate:(gdp(t)—gdp(t-1))/ gdp(t-1)		Database of World Bank, IMF, IRS	Onwioduokit and Bassey (2014); Slimani (2016); Salma et al. (2016); Tung (2018); Bhari et al. (2020)
Explanatory variable
Government expenditure	ge	Current Government expenditure rate/GDP	-
National savings	ns	National savings rate/GDP	+
Total investment	inv	Ratio of total investment/GDP	+
Inflation	inf	(cpi(t)—cpi (t-1))/cpi(t-1)	-
Budget balance	bd	Overall budget balance ratio/GDP	±
Labor	labo	Labor rate/population	+
Trade openness	open	(Exports + Imports)/gdp	+
Exchange rate	exch	Multilateral real exchange rate (REER) (2010 =100)	-/+
Interest rate	rate	Interest rate	-
Money supply	m2	Money supply ratio/GDP	+
Threshold variable
Budget balance	bd	Overall budget balance ratio /GDP	±

Source: Summarized by the author

Table 2. Descriptive statistics of variables in the model

Variable	Observation	Average	Std. Dev.	Min	Max
gdp	960	5.143572	5.001177	−33.1008	34.46621
ge	960	15.37419	12.62258	3.460336	147.7333
ns	960	31.00628	27.13275	−16.359	372.9881
inv	960	27.01378	9.146997	9.077629	69.52741
inf	960	5.335678	6.859288	−10.0675	57.07451
bd	960	8.924415	21.98086	−11.6767	256.3858
labo	960	61.96513	11.46615	36.828	87.898
open	960	98.01235	67.1637	0.167418	442.62
exch	960	96.38023	18.13781	22.2904	296.331
rate	960	11.5211	6.627365	0.994	56.47303
m2	960	72.78627	61.2689	7.865443	400.4068

Source: The author’s calculations

Table 3. The unit root test result

Variables	Statistic	p-value
gdp	−9.4251	0.0000
ge	−1.7767	0.0378
ns	−3.2640	0.0005
inv	−1.5905	0.0559
inf	−9.0445	0.0000
bd	−2.4532	0.0071
labo	−9.4251	0.0000
open	−1.8297	0.0336
exch	−9.0445	0.0000
rate	−1.7441	0.0406
m2	−1.9543	0.0253

Source: The author’s calculations

Table 4. Estimated results of regression model (1)

Variable	Pooled-OLS	FEM	REM	FGLS
ge	−0.062	−0.038	−0.057	−0.062
	(0.019)***	(0.034)	(0.024)**	(0.019)***
ns	0.020	0.010	0.020	0.020
	(0.012)*	(0.016)	(0.014)	(0.012)*
bd	0.073	0.081	0.075	0.073
	(0.018)***	(0.025)***	(0.022)***	(0.018)***
inf	−0.031	−0.067	−0.046	−0.031
	(0.026)	(0.028)**	(0.026)*	(0.025)
inv	0.004	0.013	0.004	0.004
	(0.014)	(0.021)	(0.018)	(0.014)
labo	0.053	−0.069	0.033	0.053
	(0.015)***	(0.067)	(0.026)	(0.015)***
open	−0.002	0.022	0.003	−0.002
	(0.003)	(0.008)***	(0.004)	(0.003)
exch	0.014	0.018	0.015	0.014
	(0.009)	(0.011)*	(0.010)	(0.009)
rate	0.070	0.017	0.043	0.070
	(0.029)**	(0.063)	(0.043)	(0.029)**
m2	−0.008	−0.053	−0.017	−0.008
	(0.003)**	(0.010)***	(0.005)***	(0.003)**
_cons	−1.017	7.515	0.532	−1.017
	(1.481)	(4.548)*	(2.170)	(1.472)
Total observations	960	960	960	960
F-test	Prob>F = 0.0000
Breush—Pagan test	Prob>chibar2 = 0.0000
Hausman test	Prob>chi2 = 0.0121
VIF mean	1.97
Heteroskedasticity		Prob>chi2 = 0.0000
Autocorrelation		Prob>chi2 = 0.0011

Source: The author’s calculations. * indicates significance level at 0.10 level, ** indicates significance level at 0.05 level, *** indicates significance level at 0.01 level

Table 5. Results of the threshold regression model (2)

Threshold variable	Threshold value/Regression coefficient	p-value
Double threshold effect test
bd	22.6935–25.1950	0.0533*
(2) Results of estimation coefficient of the threshold regression model
${\hat{\beta }}_0$	0.0304305	0.548
${\hat{\beta }}_1$	0.3600114	0.000***
${\hat{\beta }}_2$	0.0106747	0.609

Source: The author’s calculations. * indicates significance level at 0.10 level, ** indicates significance level at 0.05 level, *** indicates significance level at 0.01 level

Table 6. Results of the threshold test (2)

Variable	Pooled-OLS	FE	RE	FGLS
ge	−0.051	−0.040	−0.054	−0.051
	(0.019)***	(0.033)	(0.024)**	(0.019)***
ns	0.024	0.014	0.024	0.024
	(0.011)**	(0.015)	(0.013)*	(0.011)**
bd	0.065	0.059	0.058	0.065
	(0.018)***	(0.025)**	(0.022)***	(0.018)***
inf	−0.029	−0.067	−0.046	−0.029
	(0.025)	(0.028)**	(0.026)*	(0.025)
inv	−0.007	0.012	−0.002	−0.007
	(0.014)	(0.021)	(0.017)	(0.014)
labo	0.053	−0.044	0.037	0.053
	(0.015)***	(0.066)	(0.025)	(0.015)***
open	−0.002	0.019	0.002	−0.002
	(0.003)	(0.008)**	(0.004)	(0.003)
exch	0.014	0.015	0.013	0.014
	(0.009)*	(0.011)	(0.010)	(0.009)*
rate	0.072	0.034	0.054	0.072
	(0.029)**	(0.062)	(0.042)	(0.029)**
m2	−0.007	−0.046	−0.015	−0.007
	(0.003)**	(0.010)***	(0.005)***	(0.003)**
exam_1	8.969	8.518	8.969	8.969
	(1.391)***	(1.457)***	(1.411)***	(1.383)***
_cons	−1.176	6.348	0.510	−1.176
	(1.450)	(4.471)	(2.130)	(1.441)
Total observations	960	960	960	960
F-test	Prob > F = 0.0000
Breush–Pagan test	Prob > chibar2 = 0.0000
Hausman test	Prob>chi2 =0.0597
VIF mean	1.89
Heteroscedasticity	Prob>chi2 = 0.0000
Autocorrelation	Prob > F = 0.0012

Source: The author’s calculations. * indicates significance level at 0.10 level, ** indicates significance level at 0.05 level, *** indicates significance level at 0.01 level

Table 7. Distribution of Asian countries classified by budget balance threshold values

Year	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
bd $\le$ 22.6935% GDP	92%	92%	90%	90%	90%	90%	88%	88%	88%	90%
22.6935% GDP < bd $\le$ 25.1950 %GDP	0%	0%	2%	4%	4%	2%	2%	4%	2%	2%
bd $>$ 25.1950% GDP	8%	8%	8%	6%	6%	8%	10%	8%	10%	8%
Year	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
bd $\le$ 22.6935% GDP	90%	88%	88%	90%	90%	96%	96%	96%	96%	94%
22.6935% GDP < bd $\le$ 25.1950 %GDP	0%	2%	0%	0%	0%	0%	0%	0%	0%	0%
bd $>$ 25.1950% GDP	10%	10%	13%	10%	10%	4%	4%	4%	4%	6%

Source: Calculated results

Table 1. List of countries in the sample of study

id	Code	Country	id	Code	Country
1	AFG	Afghanistan	25	LBN	Lebanon
2	ARM	Armenia	26	MAC	Macao SAR, China
3	AZE	Azerbaijan	27	MYS	Malaysia
4	BHR	Bahrain	28	MDV	Maldives
5	BGD	Bangladesh	29	MNG	Mongolia
6	BTN	Bhutan	30	MMR	Myanmar
7	BRN	Brunei Darussalam	31	NPL	Nepal
8	KHM	Cambodia	32	OMN	Oman
9	CHN	China	33	PAK	Pakistan
10	CYP	Cyprus	34	PHL	Philippines
11	GEO	Georgia	35	QAT	Qatar
12	HKG	Hong Kong SAR, China	36	SAU	Saudi Arabia
13	IND	India	37	SGP	Singapore
14	IDN	Indonesia	38	LKA	Sri Lanka
15	IRN	Iran, Islamic Rep.	39	SYR	Syrian Arab Republic
16	IRQ	Iraq	40	TJK	Tajikistan
17	ISR	Israel	41	THA	Thailand
18	JPN	Japan	42	TLS	Timor-Leste
19	JOR	Jordan	43	TUR	Turkey
20	KAZ	Kazakhstan	44	TKM	Turkmenistan
21	KOR	Korea, Rep.	45	ARE	United Arab Emirates
22	KWT	Kuwait	46	UZB	Uzbekistan
23	KGZ	Kyrgyz Republic	47	VNM	Vietnam
24	LAO	Lao PDR	48	YEM	Yemen, Rep.

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