The Impact of Public Expenditure and Money Supply on Economic Growth: The Case of Afghanistan (2007-2020)

Abstract

The study seeks to identify the impact of money supply and public expenditure on the economic growth of Afghanistan from 2007-2020. The ordinary least square (OLS) method was used to estimate the coefficients of the dependent variables. An augmented Dicky-Fuller (ADF) unit root test was used to find out whether the data contained a unit root. Jarque-Bera, Multicollinearity, and Breusch-Pegan-Godfrey normality, MultiCollinearity and heteroscedasticity diagnostic tests were applied. The results imply that public expenditure both capital and consumption expenditure have a positive significant impact on the economic growth of Afghanistan whereas the association between money supply and economic growth is not significant. As a result, the government should practice significant fiscal policy to stimulate economic growth and use the money supply to fight inflationary situations.