Panel data analysis of causal relationship between public expenditures and economic growth

Public expenditures are the whole of activities that directly affect the country's economy. The examination of economic growth within the scope of public expenditures is a very important issue in terms of local governments and innovations in the public sector. All activities within the scope of economic growth are directly related to public expenditures. Political and financial policies of countries directly affect public expenditures. It is of great importance to make public expenditures for the needs of citizens and the state and to examine various fiscal policies for economic growth in this area. Although the relationship between public expenditures and economic growth has been a subject that has been discussed in the past theories, it still maintains its popularity today as it is the permanent determinant of the fiscal and political policies of the countries. There are four cases related to this relationship: causality from public expenditures to economic growth, from economic growth to public expenditures, mutual causality and the absence of any causal relationship. Studies have shown that the results vary from country to country and for different periods of the same country. In this thesis, the relationship between public expenditures and economic growth has been examined. Within the scope of the research, issues such as the reasons for public expenditures, public expenditure activities and the place of public expenditures in economic growth were emphasized, and the relationship between public expenditures and economic growth was discussed within the scope of Wagner's law. In the application part of the study, the relationship in question was examined with the help of panel causality tests for OECD countries. According to the results of the analysis, it was determined that there is a one-way causality relationship from economic growth to public expenditures.