The Composition of Malaysian Government Expenditure and Economic Growth

The purpose of this study is to investigate the effect of Malaysian government expenditure toward different sectors on growth. This study covers six sectors of government expenditure which are the spending on health, security, education and training, trade and industry, transport, general administration. Johansen co-integration test and Granger Causality test will be used in this study to find the long run relationship between variables, from year 1970 to 2010. Result shows that government expenditure on health, transport, trade and industry are positively and significantly contribute to economic growth while spending on education and training, security, general administration are negatively related to growth in Malaysia. Besides that, gross domestic product per capita is Granger Cause every composition of government expenditure. This study could contribute in a way by searching the actual effect of government spending, hence policy makers can have a better planning on how the money should be used, with the main objective is to ensure sustainable economic growth.