Estimation the causality between government expenditure and economic growth in the republic of Yemen By using co-integration analysis and error correction model (1990-2007)‎

Abstract EN

The Economy of the Republic of Yemen has been facing serious fiscal, economic and political adjustment due to the Gulf crises as well as the burden cost of unification and civil war in 1994, all these factors led to severe structural imbalances in the Yemeni economic structure.

The objective of this paper is to examine the causal relationship between government expenditure (GEX) and gross domestic product (GDP) during the period 1990-2007 by using Johansen's co-integration technique, granger causality test and error correction model.

The results of (ADF) and (PP) tests shows that both the variables in the levels and first differences are non-stationary times series or integrated of order (1) and exist unit root at the levels of significance 5% , while the cointegration results reveal to the existence of long-run equilibrium relationship between (GEX) and (GDP) which supported by (ADF) and ( pp) tests.