Wagner’s Law and the Dynamics of Government Spending on Indonesia

The empirical relationship between public expenditure and economic growth can be analysed from different viewpoints. This study focuses on the testing of validity Wagner’s law for Indonesian economy. high in sample period 1980–2014 makes likely to applicable Indonesia. Causality cointegration techniques are used. A key finding our vector autoregression analysis is unidirectional causality running GDP price government expenditure, supporting law. In case this also finds evidence a long-run cointegrating relationship, which appears stable supports causality. vast majority deviations equilibrium found transitory shocks expenditure. Most appear significantly countercyclical activity, suggesting that does play role stabilisation.