Government expenditure and economic growth: an ARDL approach for the case of Iran

This paper examines the relationship between Government Recurrent Expenditure (GRE) and economic growth in Iran for the period 1970–2010, based on the autoregressive distributed lag (ARDL) approach. The study finds a cointegrating relationship among real GDP, government expenditure, capital stock, oil revenues and education, yet government expenditure do not make a significant marginal contribution to the economic growth in Iran. The results thus do not support the Keynesian approach which claims that demand side fiscal policy stimulate economic growth.