Granger Test and ARDL Model for the Socio-Economic Challenges Investigation: Public Expenditure Components, Economic Growth, and Inflation
This study investigates the relationship between inflation recurrent expenditure, capital expenditure, and economic growth in Algeria in 1980–2022, employing Granger causality and an ARDL model. The results obtained confirm the hypothesis on the existence of a cointegration relationship between publ...
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| Format: | Article |
| Language: | English |
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The Academic Research and Publishing UG (i. G.) (AR&P) LLC
2024-12-01
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| Series: | SocioEconomic Challenges |
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| Online Access: | https://armgpublishing.com/wp-content/uploads/2024/12/SEC_4_2024_5.pdf |
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| author | Fatma Zohra Hamadouche Bekhta Hamadouche Malak Mohammad Ghandour Aicha Hamadouche Brahim Boutrig |
| author_facet | Fatma Zohra Hamadouche Bekhta Hamadouche Malak Mohammad Ghandour Aicha Hamadouche Brahim Boutrig |
| author_sort | Fatma Zohra Hamadouche |
| collection | DOAJ |
| description | This study investigates the relationship between inflation recurrent expenditure, capital expenditure, and economic growth in Algeria in 1980–2022, employing Granger causality and an ARDL model. The results obtained confirm the hypothesis on the existence of a cointegration relationship between public expenditure components, economic growth, and inflation; the long-term results show that recurrent expenditure has a positive and significant relationship with inflation — a 1% increase in current expenditures leads to a 2.14% increase in inflation. Furthermore, capital expenditure negatively and significantly impacts inflation (at a 10% significance level); an increase of 1% in capital expenditure leads to an approximately 1.08% decrease in the inflation rate. GDP per capita also hurts the inflation rate in the long term (at a 10% significance level). An increase of 1% in GDP per capita leads to a 2.94% decrease in the inflation rate. The exchange rate has a negative and significant impact on inflation; any increase in the exchange rate by 1% leads to a reduction in inflation by 1.31%. In the short term, capital expenditure is the only variable with a significant relationship with inflation, where a 1% increase drives inflation up by 1.08% in the same year and 1.13% in the next. The error correction term (-0.75) highlights a strong adjustment mechanism, with deviations from long-term equilibrium corrected within approximately 16 months. The causality test results suggest unidirectional causality from economic growth to inflation at the 5% significance level. The study recommends prioritizing recurrent expenditures for essential services while enhancing capital investments in infrastructure to support economic growth. Exchange rate stability should be maintained to mitigate inflationary pressures, particularly in import-dependent sectors. Efforts to foster GDP per capita growth should include supporting private sector development and job creation. Additionally, fiscal discipline, transparency, and robust monitoring systems for public spending are crucial to ensuring efficient use of resources and controlling inflation. |
| format | Article |
| id | doaj-art-4071102f68b44621a37c3b0e9459e02d |
| institution | Kabale University |
| issn | 2520-6621 2520-6214 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | The Academic Research and Publishing UG (i. G.) (AR&P) LLC |
| record_format | Article |
| series | SocioEconomic Challenges |
| spelling | doaj-art-4071102f68b44621a37c3b0e9459e02d2025-01-12T17:09:16ZengThe Academic Research and Publishing UG (i. G.) (AR&P) LLCSocioEconomic Challenges2520-66212520-62142024-12-0184708710.61093/sec.8(4).70-87.2024Granger Test and ARDL Model for the Socio-Economic Challenges Investigation: Public Expenditure Components, Economic Growth, and InflationFatma Zohra Hamadouche0https://orcid.org/0009-0009-4642-227XBekhta Hamadouche1https://orcid.org/0009-0006-6253-6195Malak Mohammad Ghandour2https://orcid.org/0009-0007-2062-0943Aicha Hamadouche3https://orcid.org/0000-0002-7098-1970Brahim Boutrig4https://orcid.org/0009-0007-7891-3554PhD, Lecturer Class (A), National Higher School of Statistics and Applied Economics, Kolea, AlgeriaPhD, Khemis Miliana Faculty of Economic, Commerce and Management Sciences, Djilali Bounamaa University, AlgeriaPhD, Basic and Applied Sciences Research Center, Al Maaref University, LebanonPhD, Ecole Superieure de Commerce (ESC), Kolea, AlgeriaPhD, National Higher School of Statistics and Applied Economics, AlgeriaThis study investigates the relationship between inflation recurrent expenditure, capital expenditure, and economic growth in Algeria in 1980–2022, employing Granger causality and an ARDL model. The results obtained confirm the hypothesis on the existence of a cointegration relationship between public expenditure components, economic growth, and inflation; the long-term results show that recurrent expenditure has a positive and significant relationship with inflation — a 1% increase in current expenditures leads to a 2.14% increase in inflation. Furthermore, capital expenditure negatively and significantly impacts inflation (at a 10% significance level); an increase of 1% in capital expenditure leads to an approximately 1.08% decrease in the inflation rate. GDP per capita also hurts the inflation rate in the long term (at a 10% significance level). An increase of 1% in GDP per capita leads to a 2.94% decrease in the inflation rate. The exchange rate has a negative and significant impact on inflation; any increase in the exchange rate by 1% leads to a reduction in inflation by 1.31%. In the short term, capital expenditure is the only variable with a significant relationship with inflation, where a 1% increase drives inflation up by 1.08% in the same year and 1.13% in the next. The error correction term (-0.75) highlights a strong adjustment mechanism, with deviations from long-term equilibrium corrected within approximately 16 months. The causality test results suggest unidirectional causality from economic growth to inflation at the 5% significance level. The study recommends prioritizing recurrent expenditures for essential services while enhancing capital investments in infrastructure to support economic growth. Exchange rate stability should be maintained to mitigate inflationary pressures, particularly in import-dependent sectors. Efforts to foster GDP per capita growth should include supporting private sector development and job creation. Additionally, fiscal discipline, transparency, and robust monitoring systems for public spending are crucial to ensuring efficient use of resources and controlling inflation.https://armgpublishing.com/wp-content/uploads/2024/12/SEC_4_2024_5.pdfardl modelinflationcapital expenditurecointegrationrecurrent expenditureeconomic growtherror correctiongranger causalitysocio-economic challenges |
| spellingShingle | Fatma Zohra Hamadouche Bekhta Hamadouche Malak Mohammad Ghandour Aicha Hamadouche Brahim Boutrig Granger Test and ARDL Model for the Socio-Economic Challenges Investigation: Public Expenditure Components, Economic Growth, and Inflation SocioEconomic Challenges ardl model inflation capital expenditure cointegration recurrent expenditure economic growth error correction granger causality socio-economic challenges |
| title | Granger Test and ARDL Model for the Socio-Economic Challenges Investigation: Public Expenditure Components, Economic Growth, and Inflation |
| title_full | Granger Test and ARDL Model for the Socio-Economic Challenges Investigation: Public Expenditure Components, Economic Growth, and Inflation |
| title_fullStr | Granger Test and ARDL Model for the Socio-Economic Challenges Investigation: Public Expenditure Components, Economic Growth, and Inflation |
| title_full_unstemmed | Granger Test and ARDL Model for the Socio-Economic Challenges Investigation: Public Expenditure Components, Economic Growth, and Inflation |
| title_short | Granger Test and ARDL Model for the Socio-Economic Challenges Investigation: Public Expenditure Components, Economic Growth, and Inflation |
| title_sort | granger test and ardl model for the socio economic challenges investigation public expenditure components economic growth and inflation |
| topic | ardl model inflation capital expenditure cointegration recurrent expenditure economic growth error correction granger causality socio-economic challenges |
| url | https://armgpublishing.com/wp-content/uploads/2024/12/SEC_4_2024_5.pdf |
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