Original Articles: 2014 Vol: 6 Issue: 6
Fiscal expenditure and traffic sector growth: Evidence from panel error correction model and panel vector autoregression in China
This paper applies panel error correction model (PECM) and panel vector autoregression (PVAR) to examine the effect of fiscal expenditure on traffic sector growth in China, using 31 provinces panel data for the time period 2007-2012. The empirical results support that in the short-term the dynamic effect of fiscal expenditure on traffic sector growth is negative in the east china, but in west china it is positive. In the long-term, the findings provide a clear support of a positive cointegration relationship between fiscal expenditure and traffic sector growth in the west china and in the east china. This study thus provides empirical evidence of long-run and causal relationships between fiscal expenditure and traffic sector growth for our sample of countries. The empirical evidence results also present the effect of government expenditure on traffic sector growth is stronger positive in the west china than in the east china significantly. So increasing the fiscal expenditure on traffic in the west china will bring more benefit.