Public expenditure and economic growth in Nagaland: A time series analysis

There have been various studies in the field of the causal effect relationship between public expenditure and economic growth. Several explanatory variables have been used by many authors in determining the nexus between public expenditure and economic growth with different sets of models. The results emanating out of the empirical verification of the relationship done elsewhere are not convergent. Similar attempt has been made in the current context to make an empirical study of the relationship between expenditures of the Government of Nagaland at disaggregated level and Gross State Domestic Product (GSDP) during a thirty-year time period (1980–81 to 2009–10). Tools from time-series econometrics like Granger's causality, Augmented Dickey-Fuller Test for Unit-root, Co-integration Test and Error-Correction Models have been used. While the causality from GSDP to public expenditure is shown to be weak, the causality from public expenditure to GSDP is strong.