The causal relationship between government expenditure and economic growth in Tanzania,

This study examines the causal relationship between government expenditure and economic growth in Tanzania from 1966 to 2010 for the long run and short run through integrating the Error Correction Model (ECM) into the traditional Granger causality test. The empirical result shows that there is unidirectional causality running from economic growth to government expenditure in both short run and long run. Therefore the government may consider encouraging economic growth and control government expenditure in order to restore fiscal discipline and control the size of its public deficit in the long term. Furthermore, the government may consider cutting public expenditure in unproductive sectors and at the same time ensuring effective utilization of available resources to promote economic growth.