Abstract:
The government earns revenue through various activities. It spends such
income to achieve various goals for the economy. Such expenditures are
connected to the economy directly and indirectly. Accordingly, this study
investigates the impact of government expenditure on the economic growth of
Sri Lanka, incorporating annual data from 1977 to 2020. In this study,
economic growth has been used as a dependent variable, and health
expenditure, education expenditure, transport expenditure for imports,
household, and nonprofit institutions serving households (NPISH) final
consumption expenditure are used as independent variables. Data were
collected through the annual report of the Central Bank of Sri Lanka, and
World Bank. E-View 10 and Excel 2013 were used to analyze the data. This
study found that there is a positive relationship between the transport
expenditure for import, household, and NPISH final consumption and
economic growth. Education expenditure has a negative relationship with
economic growth in the long run. The error correction model discovered that
import transportation expenditure has a short-run relationship with economic
growth. Further, there is bidirectional causality between transport expenditure
for imports and economic growth, according to the Granger causality test.
Hence, based on the findings, it can be observed that government expenditures
impact economic growth. Therefore, this study recommends that provide
employment opportunities for individuals with the educational qualifications
to control the negative impact of education expenditure on economic growth.
Reduce the brain drain and improve the education standards in Sri Lanka in
the long run.
