Impulse Response Analysis of the Effects of Shocks to Government Consumption Expenditures on Macroeconomic Variables (Case Study: Oil and Non-Oil Developing Countries

The purpose of this study is to investigate the impact of government consumption expenditures on macroeconomic variables in oil and non-oil developing countries during the period 2004-2018. For this purpose, the panel vector autoregressive model (Panel Var) was used to investigate the impact of government expenditures shocks by two techniques of impulse response and variance decomposition in this model. The results of the shock response indicate that in oil and non-oil countries, the shock of government consumption expenditures in the short, medium and long run has a positive and significant effect on GDP and employment and a negative and significant impact on investment. That is, an increase in government consumption expenditure leads to an increase in GDP and employment and a decrease in investment in both groups of countries. Analysis of variance decomposition also showed that in oil and non-oil countries, the shock of government consumption expenditure has the greatest impact on GDP in the medium and long run. That is, in both groups of countries, government consumption expenditure explains a large share of changes in GDP.