The Effect of Government Expenditure on Economic Growth in Yemen During the Period 1990 - 2014 10.35781/1637-017-016-006د. سالم سويد

Abstract

The study aims primarily to test the casual relationship between the government expenditure and economic growth. The study found effective impact of government expenditure on economic growth in Yemen ,it has increased from 28,6% of domestic product in 1990 to 38.3% in 2012 . this indicates an expansionary aspect in accordance with Keynesain intervention policy . In addition , there is a noticeable server unbalanced structure where the current expenditure has a great proportion of government expenditure which ranged between 69.2% - 95.0%. Furthermore, the economic tests ensure the main hypothesis of research as there is positive casual relationship tends from real government expenditure towards real economic growth and hence it mainly affects real domestic product. The statistical tests ensure that there is a positive significant effect of real current expenditure as well as real capital expenditure on real domestic product. The major effect is for real capital expenditure where its increase by one rial would result in an increase in domestic product by 3.941 rials whereas real current expenditure would result in an increase of just 2.746 rials. The most important recommendations to improve the performance of government expenditure including correcting unbalanced structure as to direct the major portion of government expenditure for capital expenditure on economic and social infrastructure, reviewing dependence on oil to finance expenditure, and diversifying the sources income.