Abstract:
The relationship between public expenditure has been one of the most
searched issues in both developing and developed countries in the recent years.
Public expenditure and policies related to public expenditure are important for
a country and its macroeconomic stability. Hence, the objective of this study
is to investigate the relationship between public expenditure and economic
growth of Sri Lanka for the time period spanning from the year 1985 to 2015.
A model developed by Ram (1986), as summarized by (Kweka & Morrissey,
1997) is used for the analysis. Total government expenditure is disaggregated
in to three categories for the research purpose of this study as; government
investment expenditure, government consumption expenditure and
government human capital investment expenditure. Private investment was
also added as an independent variable based on the econometric model
employed for the study. All three categories of expenditure; government
investment expenditure and government human capital expenditure were
found to be insignificant in the regression, whereas private investment showed
a positive and government consumption expenditure showed a negative
significant relationship with regard to economic growth in Sri Lanka.
