Abstract

MOLINA DIAZ, Germán  and  GANTIER MITA, Marcelo. Causality between Government Expenditure and National Income: The case of Bolivia. rlde [online]. 2016, n.25, pp.41-72. ISSN 2074-4706.

This research seeks to determine the direction ofcausality between government spending and national income in Bolivia during the period 1990-2014. In order to conduct a review of the statement of Wagner s law and Keynesian theory, we proceeded the estimation of a Vector Autoregressive Model and Vector Error Correction Model, achieving to analyze short and long term relationships of the variables. Later Granger causality test were performed to define the direction ofcausality between the two variables. The results show that in the short term Keynesian theory, for the period 1990-2014 is met in the Bolivian economy. On the other hand, analyzing the long term relationship, it can be seen that the hypothesis of neutrality is met, variables do not cause each other in the sense of Granger.

Keywords : VAR; VEC; Granger Causality; Wagner’s Law; Keynes.

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