- June 28, 2017
- Posted by: admin
- Category: Current News
This study expanded the line of research in evaluating the effect of factors related to the growth of government expenditure on infrastructure with the use of the Engle and Granger (1987) approach using annual time series data from 1980 to 2014 in Lesotho. This approach provides a direct test of the economic theory and enables utilization of the estimated long-run parameters into the estimation of the short-run disequilibrium relation. The residual test showed that there is a stable long-run relationship among the variables. The government revenue, grants and loans play a significant role in determining growth of government spending in Lesotho. There is no evidence of association between growth of government spending on infrastructure and external reserves both in the long –run and short-run. The absence of this trade off can lead to accumulation of reserves above the optimal level. An increase in the allocation of government resources to capital expenditure will boost the country’s economic growth and development.