THE RELATIONSHIP BETWEEN PUBLIC EXPENDITURES AND ECONOMIC GROWTH: CASE OF THE FRAGILE FIVE

The relationship between economic growth and public expenditures has managed to maintain its importance and currency from past to present. Many aspects of this relationship are explored through theoretical and empirical papers. In this context, Keynes and Wagner's hypotheses are important topics in the literature in terms of analyzing the existence of a causal relationship between economic growth and public expenditures. In this paper, the relationship between public expenditures and economic growth of the Fragile Five countries, which are Turkey, Brazil, Indonesia, South Africa, and India, whose current account deficit and inflation rates are high and economies are dependent on foreign investment, are examined in terms of Keynes and Wagner hypotheses. As a result of the Durbin-Hausman cointegration test, in which the long-term relationship was examined, no findings were found regarding the existence of a relationship between economic growth and public expenditures. But Dumitrescu-Hurlin causality test, supporting Keynes hypothesis in the short term; a one-way causality running from public expenditures to economic growth has been determined.