The Role of Government Development Expenditure on Economic Growth: Lessons from Selected ASEAN Countries for Malaysia
DOI:
https://doi.org/10.53840/jmm.v15i1.204Keywords:
Malaysia, Singapore, Thailand, Autoregressive Distributed Lag, Government Development ExpenditureAbstract
This study employs a quantitative approach to investigate the relationship between government expenditure and economic growth in selected ASEAN countries. Using time series analysis, the research examines annual secondary data from three ASEAN countries spanning the years 2000 to 2022. The study applies the autoregressive distributed lag (ARDL) method to identify long-term cointegrating relationships among the variables. The findings indicate the short-term and long-term impacts of government spending on economic growth. The results report that Malaysia's government development expenditure (LGDE) negatively affects economic growth, while general government expenditure (LGE) shows minimal impact in the short term. However, both LGDE and LGE significantly contribute to long-term growth, with increases leading to substantial rises in GDP. In Singapore, both short-term and long-term government spending positively correlate with economic growth. Thailand's analysis reveals consistent positive effects of government spending on growth, particularly through targeted development expenditures. Based on the best practices from Thailand and Singapore, this study suggests that Malaysia could benefit from strategic investments in infrastructure, technology, and human capital to enhance its long-term economic performance. The research also underscores the importance of robust governance frameworks to ensure the effective implementation of government spending policies.
Downloads
References
Abdullah, A., Rahman, N. A., Ismail, S., & Yusof, M. H. (2020). Government expenditure and economic growth in Malaysia: A time-series analysis. Journal of Economic Development, 25(2), 45–62.
Ahmad, M., & Kadir, S. (2022). Public development expenditures and economic growth in Malaysia. Journal of Economic Policy.
Ahuja, A., & Pandit, V. (2020). Government expenditure and economic growth: A study of the Indian economy. Journal of Economic Development, 42(3), 39–55.
Ahuja, D., & Pandit, D. (2020). Public expenditure and economic growth: Evidence from the developing countries. FIIB Business Review, 9(3), 228-236.
Amusa, K., & Oyinlola, M. A. (2019). The effectiveness of government expenditure on economic growth in Botswana. African Journal of Economic and Management Studies, 10(3), 368–384. https://doi.org/10.1108/AJEMS-03-2018-0081
Anoop, K., Suresh, B., Seth, B., Behera, S. R., & Rath, D. P. (2023). An empirical investigation of the relationship between government revenue, expenditure, and economic growth in selected EMEs. Economic Journal of Emerging Markets, 15(1), 101–113. https://doi.org/10.20885/ejem.vol15.iss1.art8
Aschauer, D. A. (1989). Is public expenditure productive? Journal of Monetary Economics, 23(2), 177-200. https://doi.org/10.1016/0304-3932(89)90047-0
Aschauer, D. A. (1989). Is public expenditure productive? Journal of Monetary Economics, 23(2), 177-200.
Asian Development Bank (2023). Investing in human capital for future growth. Manila: ADB Publications.
Asian Development Bank. (2023). Asian development outlook 2023: Economic opportunities in Southeast Asia. https://www.adb.org/publications/asian-development-outlook-2023
Association of Southeast Asian Nations. (2015). ASEAN Economic Community (AEC) Blueprint 2025. ASEAN Secretariat. https://www.asean.org/wp-content/uploads/2012/05/AEC-Blueprint-2025-FINAL.pdf
Attari, M. I. J., & Javed, A. Y. (2013). Inflation, economic growth and government expenditure of Pakistan: 1980-2010. Procedia Economics and Finance, 5, 58-67.
Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82(6), 1095–1117. https://doi.org/10.1086/260266
Barro, R. J. (1990). Government spending in a simple model of endogenous growth. Journal of Political Economy, 98(5, Part 2), S103-S125. https://doi.org/10.1086/261726
Barro, R. J. (1991). Economic growth in a cross section of countries. Quarterly Journal of Economics, 106(2), 407-443.
Devarajan, S., Swaroop, V., & Zou, H. F. (1996). The composition of public expenditure and economic growth. Journal of Monetary Economics, 37(2), 313–344. https://doi.org/10.1016/S0304-3932(96)90039-2
Easterly, W. (1993). How much do distortions affect growth? Journal of Monetary Economics, 32(2), 187–212. https://doi.org/10.1016/0304-3932(93)90024-V
Giang, H. T. (2020). Trade openness and economic growth: A study on ASEAN countries. Asian Economic Policy Review, 15(1), 41-58.
Girum, Dagne. (2022). Government expenditure for economic growth: The Ethiopian experience. The Indian Economic Journal, 71(2):434-451. https://doi.org/10.1177/00194662221135998
Han, X., Li, L., & Tang, Z. (2021). Government spending, private investment, and economic growth: Evidence from ASEAN countries. Review of Economics and Finance, 19(2), 234-245.
Hassan, A. & Ghani, R. (2020). Smart infrastructure investments in Malaysia: A pathway to balanced growth. Journal of Infrastructure Development.
Hassan, A. (2020). Current expenditure patterns and economic outcomes in Malaysia. Southeast Asian Economic Review.
IMF (2022). Enhancing Governance for Effective Public Spending. Washington, D.C.: International Monetary Fund.
International Monetary Fund (IMF). (2021). Crisis Upon crisis. International Monetary Fund.
Jusoh & Isa, Z. (2018). Public investment, economic growth, and employment in Malaysia: In UN Environment Programme (UNEP) 2023. Keeping the promise.
Keynes, J. M. (1936). The general theory of employment, interest, and money. Macmillan.
Khalid, S. & Abdul Aziz, Z. (2019). Infrastructure investments and regional balance in Malaysia. Malaysian Journal of Economic Studies.
Krugman, P. (2015). End this depression now! W. W. Norton & Company.
Lee, Y. & Liew, C. (2016). Singapore's economic development: The role of infrastructure and human capital. Asian Economic Journal.
Lim, J. (2018). Singapore as a global business hub: Infrastructure and workforce development. Global Business Review.
Lim, S., & Ho, C. (2019). Healthcare expenditure and economic growth in Malaysia: An empirical analysis. Asian Economic Review, 37(3), 321-336.
Liu, D. (2023). International energy agency (IEA). In The Palgrave Encyclopedia of Global Security Studies (pp. 830-836). Cham: Springer International Publishing.
Liu, Y. (2009). Exploring the relationship between urbanization and energy consumption in China using ARDL (autoregressive distributed lag) and FDM (factor decomposition model). Energy, 34(11), 1846-1854.
Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3-42.
McKinsey & Company. (2022). Digital transformation in Southeast Asia: Enhancing productivity and creating new opportunities for economic diversification. McKinsey & Company.
Ministry of Finance Malaysia. (2022). Budget 2022: Malaysia's commitment to development. https://www.mof.gov.my/portal/arkib/budget/2022/bs22.pdf
Musgrave, R. A. (1969). Fiscal Systems. Yale University Press.
Narayan, P. K. (2005). The saving and investment nexus for China: Evidence from cointegration test. Applied Economics, 37(17), 1979-1990.
Ndam, M., Tanyi, P. N., Nyugha, A. J. W., & Dinga, G. D. (2022). Government spending and economic growth: Keynes or Wagner for Cameroon? ARDL/T-Y-VAR approach. Law and Economy, 1(3), 74–85. https://doi.org/10.56397/le.2022.10.08
Nguyen, H. T. (2022). Economic growth and government expenditure in ASEAN countries: A threshold approach. International Journal of Current Science Research and Review. https://doi.org/10.47191/ijcsrr/v5-i5-29
Organisation for Economic Co-operation and Development. (2022), OECD economic outlook, Volume 2022 Issue 2, OECD Publishing, Paris. https://doi.org/10.1787/f6da2159-en.
Organisation for Economic Co-operation and Development. (2022). Open and connected government review of Thailand. OECD Publishing.
Peacock, A. T., & Wiseman, J. (1961). The growth of public expenditure in the United Kingdom. Princeton University Press.
Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modeling approach to cointegration analysis. In Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium (pp. 371-413). Cambridge University Press.
Pesaran, M. H., & Shin, Y. (1999). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. In Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium (pp. 371-413). Cambridge University Press.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.
Pholphirul, P. (2010). The impact of education and healthcare on Thailand's economic growth. ASEAN Economic Bulletin..
Romer, C. D., & Romer, D. H. (2010). The macroeconomic effects of tax changes: estimates based on a new measure of fiscal shocks. American Economic Review.
Sumandeep, S., Ravi, R. K., & Sharma, R. K. (2023). Empirical analysis of public revenue, development expenditure and economic growth in India using vector autoregressive model. Research Square. https://doi.org/10.21203/rs.3.rs 2418404/v1
Tanaka, Y. (2024). Government development expenditure and its impact on ASEAN growth. Asian Economic Journal, 38(4), 499-523.
Tanaka. R. (2024). Government expenditure and economic growth: A comparative analysis of Japan. International Journal of Economics. https://doi:10.47604/ijecon.2444
United Nations Environment Programme. (2023). UNEP annual report 2023. Keeping the Promise.
https://wedocs.unep.org/bitstream/handle/20.500.11822/44777/UNEP_Annual_Report_2023.pdf?sequence=19
United Nations Conference on Trade and Development. (2021). Trade and development report 2021. https://unctad.org/publication/trade-and-development-report-2021
Vongprasert, C. (2019). Long-term economic growth and public spending in Thailand: A focus on education and healthcare. Thai Journal of Public Policy.
Wagner, A. (1893). Finanzwissenschaft. Leipzig: C.F. Winter.
World Bank. 2022. Global economic prospects, June 2022. World Bank. http://hdl.handle.net/10986/37224
World Bank. (2024). World Development Indicators. https://databank.worldbank.org/reports.aspx?source=2&series=sh.dyn.2024
Zulkifly, R. (2021). Optimizing public expenditure for sustainable growth in Malaysia. Malaysian Public Policy Review.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Journal of Management and Muamalah
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
