Impact of Government Spending on Private Consumption and on the Economy: The Case of Thailand
Authors: Paitoon Kraipornsak
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.
Keywords: government consumption spending, private consumption on food, Vector Error Correction Mechanism, substitution effect, complementary effect, government capital spending, nonfood, and services
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1072934Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 1784
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