Abstract:
The purpose of this paper is to examine the long-term impacts of fiscal variables on
economic growth in Singapore and Sri Lanka from 1972 to 2017. Autoregressive Distributed
Lag (ARDL)-ECM approach and some diagnostic and specification tests were employed to
determine the impact of fiscal variables on economic growth on time series data. The results
confirm that government expenditure, government revenue and investment expenditure
positively and significantly affect in Singapore as well as Sri Lanka’s economic growth in
the long run. This result is consistence with the theory of Keynesian views. Moreover, the
Toda-Yamamoto’s Granger causality results reveal that there is bidirectional causality
between inflation rate and economic growth in Singapore. Further, the results show that
bidirectional causality relationship between investment expenditure and economic growth in
Sri Lanka. Grounded on the premises that there are little or no studies on the impact of fiscal
variables on Singapore and Sri Lankan economy with more recent data., this paper provides
new evidence on the potential effect of fiscal variables on Singapore’s and Sri Lankan
economic growth over the last four decades.
