Budget deficits, investment and economic growth: a panel cointegration approach

• Main Authors: Goitsemodimo Abel Molocwa, Yohane Khamfula, Priviledge Cheteni
• Format: Article
• Language: English
• Published: LLC "CPC "Business Perspectives" 2018-09-01
• Series: Investment Management & Financial Innovations
• Subjects: BRICS; budget; economic growth; panel analysis
• Online Access: https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/10816/imfi_2018_03_Molocwa.pdf

This paper discusses the political economy of budget deficits among the BRICS nations between 1997 and 2016 using a panel cointegration approach to determine the long-run relationship between economic growth, budget deficits, inflation and gross investment. The results of the study show a long-run equilibrium association among economic growth and the selected variables. Furthermore, there is a positive relationship between budget deficit, inflation, and economic growth, for the period under study for BRICS countries. Lastly, the results support the view that there is bi-directional linkage from budget deficit to economic growth and vice versa.