Impact of government expenditure on economic growth in different states in South Africa

Figures & data

Figure 1. Economic growth rate and government expenditure growth rate.

Sourced: (SARB 2020).

Table 1. Descriptive statistics

Variable	Obs	Mean	Std. Dev.	Min	Max	Skewness	Kurtosis
$GDP\mathrm{\_}P$	32	2.0656	2.499498	−6.3	5.6	0.0052	0.0198
$AOLR$	32	.59509	2.139125	−4.33	4.22	0.2930	0.9992
$AOKR$	32	.16988	1.969614	−2.33	5.21	0.1897	0.6086
$HC$	32	9.9049	4.268413	−2.77	21.43	0.6867	0.0300
$G$	32	2.1106	2.620653	−6.00	7.67	0.1347	0.0471
$GFCF$	31	8.9263	8.605567	−11.64	26.46	0.9632	0.7486

Table 2. Correlation between variables

Economic variable	$GDP$	$AOLR$	$AOKR$	$HC$	$G$	$GFCF$
$GDP\mathrm{\_}P$	1
$AOLR$	0.8559	1
$AOKR$	−0.2264	0.1823	1
$HC$	0.3543	−0.0216	−0.5657	1
$G$	0.3051	0.3616	0.2061	−0.0133	1
$GFCF$	0.7685	0.6400	−0.1423	0.3904	0.3762	1

Table 3. Dickey–Fuller test for unit root

Variable		Dickey–Fuller test for unit root				Phillips–Perron (PP)
		Test Statistics	1% Critical Value	5% Critical Value	10% Critical Value	Test Statistics	1% Critical Value	5% Critical Value	10% Critical Value
GDPR	Z(t)	−3.886	−3.709	−2.983	−2.623	−3.886	−3.709	−2.983	−2.623
D.AOLR	Z(t)	−5.487	−3.716	−2.986	−2.624	−5.487	−3.716	−2.986	−2.624
D.AOKR	Z(t)	−8.280	−3.716	−2.986	−2.624	−8.280	−3.716	−2.986	−2.624
HC	Z(t)	−3.997	−3.709	−2.983	−2.623	−3.997	−3.709	−2.983	−2.623
D.G	Z(t)	−4.003	−3.709	−2.983	−2.623	−4.003	−3.709	−2.983	−2.623
D.GFC	Z(t)	−5.610	−3.723	−2.989	−2.625	−5.610	−3.723	−2.989	−2.625

Note: Number of obs = 21.

Table 4. Lag-order selection criteria

Lag	AIC	HQIC	SBIC
0	25.8959	25.9815	26.1839
1	22.8071	23.4064	24.8228
2	21.2436	22.3568	24.9872
3	17.3053*	18.9322*	22.7766*

Table 5. Johansen tests for cointegration

Maximum rank	Params	LL	Eigenvalue	Trace statistic	Critical value 5%
0	42	−304.73924	.	149.0001	94.15
1	53	−275.80617	0.86404	91.1340	68.52
2	62	−256.01131	0.74466	51.5443	47.21
3	69	−240.33515	0.66078	20.1920*	29.68

Table 6. Vector-error correction model

Economic variable	Short-run		Economic variable		Long-run
$L.\mathrm{\_}ce1$	−0.407*
	(−0.27)
$LD.GDP\mathrm{\_}P$	−2.065	$GDP\mathrm{\_}P$		1
	(−1.45)
$L2D.GDP\mathrm{\_}P$	−4.280*	$AOLR$		−1.062552***
	(−2.49)			(0.000)
$LD.AOLR$	1.349	$AOKR$		0.2075268***
	(0.98)			(0.000)
$L2D.AOLR$	4.399**	$HC$		−0.0332629*
	(2.62)			(0.038)
$LD.AOKR$	2.309*	$G$		0.0759424***
	(2.00)			(0.000)
$L2D.AOKR$	2.458	$GFCF$		−0.0511754***
	(1.54)			(0.000)
$LD.HC$	−0.478*
	(−2.06)
$L2D.HC$	−0.171
	(−0.98)
$LD.G$	−0.477***
	(−3.84)
$L2D.G$	−0.620***
	(−3.68)
$LD.GFCF$	0.444*
	(2.29)
$L2D.GFCF$	0.179
	(1.58)			.
$\mathrm{\_}cons$	0.0350	$\mathrm{\_}cons$		−.851466

Note: N = 29

*p < 0.05, ** p < 0.01, *** p < 0.001

Table 7. Eigenvalue stability condition

Eigenvalue		Modulus
−.2101073	+1.175174i	1.19381
−.2101073	− 1.175174i	1.19381
1		1
−.2191833	+.6857053i	.719884
−.2191833	- .6857053i	.719884

Table 8. Lagrange multiplier test

lag	chi2	df	Prob > chi2
1	46.9738	36	0.10419
2	38.6490	36	0.35084

Table 9. Jarque–Bera test

Equation	chi2	df	Prob > chi2
$D.GDP$	6.505	2	0.03868
$D.AOLR$	1.143	2	0.56477
$D.AOKR$	3.578	2	0.16716
$D.HC$	29.785	2	0.00000
$D.G$	11.020	2	0.00405
$D.GFCF$	1.575	2	0.45509
$ALL$	53.604	12	0.65657

Figure 2. Government expenditure shock on economic variables.

Table 10. Markov-switching dynamic regression

Economic Variables	Estimation
	1	2	3	4
	$GDP\mathrm{\_}P$	$GDP\mathrm{\_}P$	$GDP\mathrm{\_}P$	$GDP\mathrm{\_}P$
$AOLR$		0.905***	0.888***	0.915***
		(30.33)	(28.63)	(34.86)
$AOKR$		−0.206***	−0.235***	−0.206***
		(−7.36)	(−7.62)	(−7.94)
State1
$HC$		0.0405**		0.0309*
		(3.02)		(2.54)
$GFCF$		0.0197*	0.0281***	0.0173*
		(2.56)	(3.39)	(2.32)
$G$			−0.00486	−0.00910*
			(−0.24)	(−0.54)
$\mathrm{\_}cons$	−1.900*	1.111***	1.473***	1.272***
	(−1.50)	(8.02)	(17.24)	(9.54)
State2
$HC$		0.234**		0.297***
		(8.63)		(8.63)
$GFCF$		0.106	0.283***	0.134***
		(1.91)	(4.99)	(6.18)
$G$			−0.405	−0.303***
			(−1.08)	(−3.31)
$\mathrm{\_}cons$	2.804***	−1.962***	−0.118	−1.207
	(6.80)	(−4.45)	(−0.13)	(.)
N	32	31	31	31

Note: t statistics in parentheses

*p < 0.05, ** p < 0.01, *** p < 0.001.

Figure 3. State 1 to 2 filter transition probabilities and $GDP\mathrm{\_}P$.

Table 11. Transition probabilities

Transition probabilities	Estimate	Transition probabilities	Estimate
$p_{11}$	0.9231075	$p_{21}$	1.73e-20
$p_{12}$	0.0768925	$p_{22}$	1

Table 12. Expected duration

Expected duration	Estimate
$State1$	1
$State2$	13.00517

SARB. (2020). Online statistical query (historical macroeconomic timeseries information). Retrieved 11 03 2022, https://www.resbank.co.za/Research/Statistics/Pages/OnlineDownloadFacility.aspx.

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