CAUSALITY BETWEEN GOVERNMENT EXPENDITURE AND ECONOMIC GROWTH IN ALGERIA: EXPLOSIVE BEHAVIOR TESTS AND FREQUENCY DOMAIN SPECTRAL CAUSALITY

This paper examines the causal relationship between government expenditure and economic growth in Algeria over the period of 1980-2017 using the six equations of Wagner's law, based on an econometric study using both the Supremum ADF (SADF) and generalized supremum ADF (GSADF) tests for explosive behaviors. We also employed the Johansen co-integration test and the frequency domain spectral causality depending on the Breitung-Candelon (2006) procedure.The objective of this paper is to determine which hypothesis held in the context of Algeria in the short and long-run terms, so we need to select among Wagner's law hypotheses and Keynesian view hypotheses. The findings of co-integration revealed the existence of long run relationship between the variables, while, the causality test has revealed a unidirectional causal relationship running from economic growth to government expenditure in three equations among six equations when we do not deal with the GDP and government expenditure per capita.