The Relationship Between Economic Growth and Public Spending of the Philippines during the COVID-19 Pandemic

16 Pages Posted: 17 Mar 2022

See all articles by Marvin Jericho Castillo

Marvin Jericho Castillo

Department of Physics, De La Salle University

Dylan Marcus Ordoñez

Department of Physics, De La Salle University

Al Rey Villagracia

Department of Physics, De La Salle University

Date Written: March 1, 2022

Abstract

Government expenditures and its effect on economic growth have been a subject of various debates among the literature surrounding economics. The study aims to conduct an in-depth analysis of the two macroeconomic variables with emphasis on the relation in the Philippines and how it is affected by the economic status of the country using panel data of 15 countries. The analysis and the relationship of the macroeconomic variables will be considered in the context of the global pandemic in the case of the Philippines. Furthermore, forecasting of different scenarios will also be done to determine what macroeconomic variable will lead to the most growth. Fixed effects estimation technique and Autoregressive Distributed Lag (ARDL) model for the forecasting under different scenarios were used. The results of the study show that a general negative relationship between government expenditures and economic growth was observed yet more evidence is needed to fully establish the relationship. The relationship for developing countries was shown to be negative and significant; Underdeveloped and developed countries were found to have, although insignificant, a negative and positive relationship, respectively. In the Philippines, a negative and insignificant relationship was observed. The study recommends that creating short-term policies such as boosting vaccination supplies, controlling the spread of the virus, and providing social protection for vulnerable firms and households are necessary costs to ensure the well-being of the people, even if the results show that these negatively affect economic growth. On the other hand, the forecasts showed that scenario 2, household consumption, will positively affect economic growth the most, thereby suggesting that policies to increase the consumption of citizens will be favorable for the economy.

Keywords: economic growth, public spending, fixed effects regression, forecasting, COVID-19, econometrics

Suggested Citation

Castillo, Marvin Jericho and Ordoñez, Dylan Marcus and Villagracia, Al Rey, The Relationship Between Economic Growth and Public Spending of the Philippines during the COVID-19 Pandemic (March 1, 2022). Available at SSRN: https://ssrn.com/abstract=4059421 or http://dx.doi.org/10.2139/ssrn.4059421

Marvin Jericho Castillo

Department of Physics, De La Salle University

Philippines

Dylan Marcus Ordoñez

Department of Physics, De La Salle University

Philippines

Al Rey Villagracia (Contact Author)

Department of Physics, De La Salle University ( email )

2401 Taft Avenue
Manila, Metro Manila 0922
Philippines

HOME PAGE: http://https://alreyvillagracia.wixsite.com/profile

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