Testing Wagner’s Law and Keynesian Hypothesis in Selected Post‑Soviet Countries

Abstract

The aim of this research is to test Wagner’s law and Keynesian hypothesis in 9 Post‑Soviet countries–Estonia, Latvia, Lithuania, Uzbekistan, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, and Ukraine. For this purpose, long‑and short‑run causality between real per capita GDP and real per-capita government expenditures are estimated by employing ARDL modelling approach. Estimation results support validity of Wagner’s law for Latvia, Lithuania, Uzbekistan, Georgia, Kyrgyz Republic and Ukraine, and validity of Keynesian hypothesis for Estonia, Uzbekistan, Azerbaijan, Kyrgyz Republic, and Moldova in the long‑run. Meanwhile, research findings indicate strong bidirectional short‑run causality in all countries except Lithuania and Kyrgyz Republic in the short‑run.

Keywords: Wagner’s Law; Keynesian Hypothesis; Post-Soviet Countries; Long-Run Association; Short-Run Causality; ARDL Modeling Approach

JEL Classification: H11; H20; H61; H71