Budget deficits, investment and economic growth: a panel cointegration approach

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This paper discusses the political economy of budget deficits among the BRICS nations between 1997 and 2016 using a panel cointegration approach to determine the long-run relationship between economic growth, budget deficits, inflation and gross investment. The results of the study show a long-run equilibrium association among economic growth and the selected variables. Furthermore, there is a positive relationship between budget deficit, inflation, and economic growth, for the period under study for BRICS countries. Lastly, the results support the view that there is bi-directional linkage from budget deficit to economic growth and vice versa.

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    • Figure 1. Average GDP (actual and predictions)
    • Table 1. Panel unit root results: Levin, Lin, and Chu test
    • Table 2. Panel unit root results: Im, Pesaran, and Shin test
    • Tabel 3. Pedroni panel cointegration results
    • Table 4. FMOLS and DOLS results
    • Table 5. Panel Granger causality results