les cahiers du mecas
Volume 22, Numéro 1, Pages 319-334
2026-06-02
Revisiting The Growth–expenditure Nexus In Algeria: Empirical Evidence From Cointegration Analysis
Authors : Boumediene Rania . Akriche Kamel . Houalef Rahima .
Abstract
This study examines the relationship between economic growth and government expenditure in Algeria over the period 1972–2024, with the aim of testing the validity of Wagner’s law against the Keynesian hypothesis. The analysis employs the Engle-Granger cointegration approach to identify the long-run relationship, and a Vector Error Correction Model (VECM)-based Granger causality framework to determine the direction of causality. To ensure robustness, alternative cointegration estimators-FMOLS, DOLS, and CCR-are also applied. The results confirm the existence of a long-run relationship under Wagner’s law specification, with an elasticity greater than unity, indicating that government expenditure grows more than proportionally with national income. Robustness checks support this finding, with consistent estimates across methods. The causality results reveal no short-run causality, but a significant long-run causality running from economic growth to government expenditure. Overall, the findings strongly support Wagner’s law and reject the Keynesian hypothesis in both the short and long run.
Keywords
Wagner’s Law ; Government Expenditure ; Economic Growth ; Engle–Granger Cointegration ; Algeria
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