Causality between government expenditure and national income: Evidence from Sudan

This study aims to determine the nature and direction of causality between government expenditure and national income in sudan using granger causality test and error correction model (ecm) for the period 1970-2008. the result of cointegration test shows a long-run relationship between government expenditure and national income in sudan. the causality test indicates that the direction of causality running from government expenditure to national income,both in the short and long-run. thus,the results support the keynesian proposition,which states that public spending is an important exogenous factor for stimulating national income. moreover,the study concludes that fiscal policy in sudan plays a vital role in stabilizing the economy and achieving economic goals.