{"title":"Impact of Government Spending on Private Consumption and on the Economy: The Case of Thailand","authors":"Paitoon Kraipornsak","volume":39,"journal":"International Journal of Economics and Management Engineering","pagesStart":202,"pagesEnd":210,"ISSN":"1307-6892","URL":"https:\/\/publications.waset.org\/pdf\/9524","abstract":"
Government spending is categorized into consumption spending and capital spending. Three categories of private consumption are used: food consumption, nonfood consumption, and services consumption. The estimated model indicates substitution effects of government consumption spending on budget shares of private nonfood consumption and of government capital spending on budget share of private food consumption. However, the results do not indicate whether the negative effects of changes in the budget shares of the nonfood and the food consumption equates to reduce total private consumption. The concept of aggregate demand comprising consumption, investment, government spending (consumption spending and capital spending), export, and import are used to estimate their relationship by using the Vector Error Correction Mechanism. The study found no effect of government capital spending on either the private consumption or the growth of GDP while the government consumption spending has negative effect on the growth of GDP.<\/p>\r\n","references":"[1] Pieroni, L. 2009. \"Does Defend Expenditure Affect Private\r\nConsumption? Evidence from the United States\", Economic Modelling,\r\n26: 1300-1309.\r\n[2] Deaton, A.S., and Muellbauer, J., 1980. An Almost Ideal Demand\r\nSystem, American Economic Review, 70, 312 - 326.\r\n[3] Akmal, M. and Stern, D.I., 2001. \"The Structure of Australian\r\nResidential Energy Demand\", Working Papers in Ecological Economics\r\nno. 0101, The Australian National University.\r\n[4] Anderson, G. and Blundell, R., 1983. Testing Restrictions in a Flexible\r\nDynamic Demand System: An Application to Consumer Demand in\r\nCanada, Review of Economic Studies, 50, pp. 397-410.\r\n[5] Blundell, R. 1988. \"Consumer Behaviour: Theory and Empirical\r\nEvidence- -A Survey\", The Economic Journal. 98 (389), pp. 16-65.\r\n[6] Pesaran, M.H. and Y. Shin, 1999. \"Long-run Structural Modelling\",\r\nDAE Working Paper No. 9419. University of Cambridge.\r\n[7] Tridimas, G.,2000. \"The Analysis of Consumer Demand in Greece.\r\nModel Selection and dynamic Specification\", Economic Modelling 17:\r\n455-471.\r\n[8] Woodford, M. \"Simple Analytics of the Government Expenditure\r\nMultiplier\", NBER Working Paper No. 15714, January 2010.\r\n[9] Fatas, A. and Mihov, I., 2001. The Effects of Fiscal Policy on\r\nConsumption and Employment: Theory and Evidence. CEPR Discussion\r\nPaper no. 2760.\r\n[10] Blanchard, O. and Perotti, R., 1999. \"An Empirical Characterization of\r\nthe Dynamic Effects of Changes in Government Spending and Taxes on\r\nOutput\". NBER Working Paper no. 2685.\r\n[11] Heppke-Falk, K.H., Tenhofen, J., and Wolff, G.B. 2006. \"The\r\nMacroeconomic Effects of Exogenous Fiscal Policy Shocks in Germany:\r\nA Disaggregate SVAR Analysis\", Discussion Paper Series 1, Economic\r\nStudies, no. 41, Deutsche Bundesbank.\r\n[12] Werner, R.A. 2004. \"Why has Fiscal Policy Disappointed in Japan-\r\nRevisiting the Pre-Keynesian View on the Ineffectiveness of Fiscal\r\nPolicy\", Sophia University and University of Southampton, available\r\nonline at