Government Expenditures and Economic Growth: A Cointegration Analysis for Thailand under the Floating Exchange Rate Regime

Abstract

Contributing to the controversial issue on the impact of government spending on economic growth, this paper shows that government spending has both long-run and short-run impacts in stimulating aggregate output in Thailand during the floating exchange rate regime. In addition, real money supply can also stimulate aggregate output in the long run even though it does not have any contribution to economic growth in the short run. Based on quarterly dataset during 1997Q3 to 2017Q4, the results suggest that expansionary fiscal policy is effective under the floating exchange rate regime.