Effect of Public Expenditure on Economic Growth in the Case of Ethiopia

This study's primary goal was to explain how Ethiopia's economic growth affected government spending. The time series data utilized in the study were gathered between 1980 and 2018. The time series data were subjected to the Johansen cointegration test and the vector error correction model (VECM) in order to evaluate the short- and long-term correlations between public spending and economic growth in Ethiopia. According to the study, both long- and short-term economic growths are positively and significantly impacted by government spending on education. Long-term economic growth is negatively impacted by government expenditure on agriculture, while short-term effects are negatively impacted and considerable. In the long run, investment spending has a positive but negligible impact on economic growth; however, in the short run, it has a negative but large effect. Defense spending by the government has a positive and negligible effect on economic growth over the short and long terms. Both in the short and long terms, spending on health has a favorable and considerable impact on economic growth. According to the study, government spending on the education sector would help to foster the conditions that could result in higher labor force participation rates and, consequently, higher rates of economic growth. Aiming to establish a healthy and productive society that promotes economic progress, policy should focus on complementary measures to scale-up initiatives in the health sector.


Introduction
Following Nigeria in terms of population, Ethiopia has the second-fastest expanding economy on the continent, with 6.3% growth in FY2020/21. However, with a gross national income of $960 per individual, it is also among the poorest [1]. As the most signifcant macroeconomic indicator of a society's overall performance, economic growth is the outcome of creating more goods and services, which calls for increased worker productivity and labor supply expansion. Te government must invest resources to uphold contracts, preserve national security, deter crime, and provide valued public goods in order to ensure that markets function properly and spur economic progress [2].
Te government of Ethiopia has a major responsibility to supply the country's 84.8 million citizens with public goods and services such as defense, communication, energy, roads, agriculture, and food security (MOFED [3]). According to MOFED (2013), 29.6% of Ethiopia's population is below the poverty line, and the country's average GDP per person is $550 (MOFED, 2014). Since the 19th century, there have been numerous discussions and analyses of the relationship between government spending and economic growth in the economic literature. As much as the daily, it has been investigated in numerous studies pertaining to this topic. Two ideas developed by Wagner and Keynes in their respective theoretical works are the connection between government spending and economic growth. Keynes defended the claim that increased public spending is the result of increased economic growth, which is what Wagner contends [4].
Currently, it is crucial to research how Ethiopia's economic growth is impacted by the breakdown of government spending. Tis research adds to the body of knowledge by providing further insight into how public spending afects economic growth in Ethiopia. Te study makes three contributions to the body of existing literature. First, there have  [24] China Spearman correlation Te results show that the impact of increasing government fnancial public health investment on regional economic growth rate is not only related to regional economic aggregate and development level, but also related to regional education level and regional publicity level in logical analysis Zhou et al., 2021 [25] China Generalized method of moments (GMM) Te results indicated that there was an inverted U-shaped relationship between China's institutional environment and its green growth. Tat is, the institutional environment can initially promote China's green growth but, if it is not changed, will eventually inhibit it Shabbir et al., 2021 [26] Pakistan Autoregressive distributed lags (ARDL) Te long-run fndings indicate that foreign private investment has a negative and insignifcant impact on economic growth, whereas, domestic investment shows a statistical signifcance but positive impact on Pakistan economy. Te short-run dynamic designates that both domestic and foreign private investment is signifcantly and positively associated with the growth rate Li et al., 2021 [27] Provinces in China Spatial econometric models Government public health spending and regional economic growth have signifcant positive spatial correlation and spatial agglomeration efects. Te indicator of government public health spending signifcantly promotes regional economic growth. In addition, it signifcantly promotes the economic growth of neighboring areas through certain spatial spillovers Anwar  been several debates concerning the connection between government spending and economic expansion. According to several empirical studies, there is a strong and positive correlation between government spending and economic growth [5][6][7][8][9], while many empirical investigations indicate a strong negative link [10][11][12][13]. In addition, there are several empirical research [14][15][16][17] studies whose fndings are conficting, while in others there is no correlation between government spending and economic growth, for instance [18]. Te goal of this study is to add to the body of knowledge on Ethiopia's economic development, not to resolve longstanding disputes and arguments concerning the impact of government spending. Second, as governments become more accountable and involved in the economy, public spending is rising quickly in populous nations like Ethiopia.
Te studies that attempt to analyze the efects of public sector spending on the nation's economic growth are scarce in Ethiopia, and the majority of them are out-of-date ( [19][20][21][22], and [23] are just a few examples). Tird, this study notably varies from earlier research studies in that it was conducted from 1980 to 2018 a pretty lengthy time period. Terefore, the goal of this study is to investigate, using the Johansen cointegration test and the vector error correction model, the impact of public spending on economic growth in the case of Ethiopia (VECM). Te study was organized into fve parts in which the frst part of the study deals with the introduction; the second part, deals with review of the related literature; the third part, deals with research methodology; the fourth part, deals with result and discussion and the fnal part of the study deals with conclusion and recommendation.

Empirical Studies.
Scholars have conducted a variety of research studies to better understand the relationship between public spending and economic growth, agrioutput, education, health, investment, and infation. Table 1 lists various relevant empirical literatures.

Data Description and Source.
Tis study tries to determine how Ethiopia's government spending components afect economic growth. Additionally, the study plans to employ secondary time series data for the years 1980-2018 that were gathered from various sources. Because reliable data were available for the majority of the variables used in this particular study, the researcher used data from the World Bank's World Development Indicators. As a result, information about total government spending on education, health, agriculture, defense, and investment was gathered from the World Bank and MOFED, while information about the consumer price index (CPI) was gathered from the National Bank of Ethiopia (NBE) and the World Bank.

Methods of Data Analysis.
For better understanding and discussion, the secondary data was examined using a description and econometric model. Te primary beneft of the VECM is that it has a beautiful interpretation with long-term and short-term equations. Additionally, VECM is only a representation of a cointegrated VAR; therefore, the researcher utilized VECM to examine the existence of a longrun and short-run link between the variables. Te debate and fndings served as the foundation for the conclusion and, fnally, the recommendation.

Model Specifcation.
Te mathematical explanation of the relationship between the dependent and independent variables is referred to as model specifcation. With a focus on sectorial spending, this section provides an econometric model for the relationship between government spending and economic growth in Ethiopia. Government investment spending was a further pertinent variable employed in this study, and the consumer price index (CPI) served as a control variable. Te empirical framework of this study uses the VAR approach to assess the relationship between government spending on the areas of agriculture, defense, health, education, and investment and economic growth in Ethiopia. Because there is a bidirectional relationship between government spending and economic growth, the VAR technique is used. Te evidence remains as to whether the supply of public goods and services leads to economic growth or whether economic growth drives the demand for goods and services.
GDP GROWTH � f(public Expenditure Components), GDP GROWTH � GDP per Capitat − GDP per Capita t − 1 GDP per Capita t . (1) Te public expenditure components which include: Health, Education, Military and Infrastructure expenditures are in million Ethiopian Birr per year. Te proportion of the expenditure share to the total GDP for each expenditure component was calculated as: Hence the theoretical model is modifed to be of the form: From the forgoing discussion, the composition of government expenditure is an important determinant of growth. Tus the model express GDP as a function of various components of government expenditure that include total expenditure on agriculture, investment, defense, education, health sectors and in addition consumer price index (CPI) was included, since it can be have a lasting impact on economic growth.

Te Scientifc World Journal
Te functional relationship between dependent and independent variables is shown as follows; Tus, the growth model is specifed as follows: RGDP � F(gexpedu, gexphe, gexpagri, gexpdef, gexpinv, CPI, Ui)t, (4) where t is the time, RGDP is the real gross domestic product, gexpeduis the total expenditure on education, gexphe is the total expenditure on health, gexpagri is the total expenditure on agriculture, gexpdef-the total expenditure on defense, gexpinv is the total expenditure on investment, CPI is the Consumer Price Index, and Ui is the error term.
All model variables are in real terms which are captured by dividing each nominal quantity by general price index (CPI). Expressing the dependent variables in logarithm form, an attempt were have been made to examine the impact of each explanatory variable on economic growth.
In log-linear form, the model is specifed as follows: where; log (RGDP) is the logarithm of real GDP, log (gexpedu) is the logarithm of total government expenditure on education, log (gexphe) is the logarithm of total government expenditure on health, log (gexpagri) is the logarithm of total government expenditure on agriculture, log (gexpdef ) is the logarithm of total government expenditure on defense, log (gexpinv) is the logarithm of total government expenditure on investment, log (CPI) is the logarithm of consumer price index, Ui is the error term and from B 0 , and B 1 -B 6 are the parameters.
In prior estimation of the growth model mentioned above, standard econometrics tests such as stationary and cointegration tests were conducted in order to avoid the generation of spurious regression results. Te researcher also used vector error correction model (VECM) to analyze both the short and long run impact of sectorial expenditure on agriculture, defense, investment, education, and health of economic growth.

Defnition and Measurement of Variables
Real gross domestic product (RGDP): this is the percentage rate of increase in gross domestic product. It captures the changes in value of goods and services produced in a given economy for a specifc period of time. It will be calculated as a percentage rate of change of the GDP Ademuyiwa and Adetunji [34]. Public expenditure on education (gexpedu): this is the share of expenditure in education to total government expenditure. It includes the expenditure government incur to fund basic up to higher education, by paying for teachers and lecturers, construction of learning infrastructure such as class rooms, lecture halls, ofces and purchasing of learning equipment. It also includes expenses on scholarships whether local or abroad [34]. Public expenditure on health (gexphe): this is the share of public expenditure on health to total government expenditure. It contains the amount government spends on hospital building structures, equipping the hospital institution with equipment and drugs, training of doctors and nurses and paying their salaries [35].
Public expenditure on agriculture (gexpagri): this is the share of total government expenditure on agriculture. It includes expenses such as buying modern agricultural equipment, agricultural inputs such as improved seeds, trained and hiring a number of agricultural development agents and so on [36]. Public expenditure on defense (gexpdef ): this is the fraction of expenditure on defense against the gross government expenditure. It includes expense such as buying military gadgets and equipment, salaries, training the defense forces, supporting missions and operations and expense for facilitating wars [22]. Public expenditure on investment (gexpinv): it is provided by government total capital expenditure less capital spending on health and education and the Government itself has been investing heavily to improve the country's infrastructures. Te Government is also focusing on the housing sector and low cost condominiums are being built in the capital and regional cities. Moreover, the Government is actively engaged in an initiative to improve the ease of doing business in Ethiopia [37]. Consumer Price Index (CPI): it is a measure that examines the weighted average of prices of a basket of consumer goods and services or it is the measure of the average change in prices over time that consumers pay for the basket of goods and services [38]. Table 2 shown below.

Time Series Analysis.
Te study used time series econometric models in establishing the relationship between GDP growth and Public expenditure components, as a share of GDP. Te linearity relationship is assumed between variables for the model specifed in Section 3.3 above. To address the objective of the study, the data was analyzed step by step using the processes and methods as described in the proceeding sections.

Stationarity Test.
Stationarity of a series is important due to infuence it has on its behaviour. Tus, if X and Y series are nonstationary processes, then modelling X and Y  (8) shown below will lead to spurious regression [39].
Time series data are said to be stationary if its mean, variance, and covariances do not vary overtime. Nonstationary data leads to spurious regression due to nonconstant mean and variance [40]. Diferencing a series using diferencing operators produces other set of observations. For instance, the frst-diferenced values are given as: ΔX t � X t − X t − 1. If a series is stationary without any diferencing, it is said to be I (0) or integrated of order 0. However, if a series is stationary after frst diference is said to be I (1) or integrated of order 1. In order to check for stationarity in the series (whether in levels or frstdiferences), the Dickey and Fuller (1979) test was used.

Cointegration Test.
After establishing whether the series is stationary in levels or frst diference (and if the series are integrated of the same order), then Johansen's procedure is used to determine whether there exist a cointegrating vector among the variables [41]. Te procedure uses two tests to determine the number of cointegrating vectors which are the maximum eigenvalue test and the trace test. Te null hypothesis for the maximum eigenvalue is to test r cointegrating relations against the alternative of r + 1 cointegrating relations where r � 0, 1, 2, . . ., n -1, and n is the number of variables in the system. Te test statistic for maximum eigenvalue is computed as where ω is the maximum eigenvalue and T is the sample size. Te trace statistics tests the null hypothesis of r cointegrating relations against the alternative of n cointegrating relations, where n is the number of variables in the system and r � 0, 1, 2, . . ., n − 1. Te test statistic is computed using the following expression: In some cases the maximum eigenvalue statistic and the trace statistic may yield diferent results. In the event that this happens, Alexander [42] indicates the results of the trace test should be preferred.

Vector Error Correction Model (VECM).
After the Johansen cointegration test is performed, the next step is to ft the appropriate time series model. If cointegration has been established between the variables, then this implies that there exists a long-run relationship between the variables. Hence, the VECM is applied in order to determine the short-run relationships of cointegrated variables. On the other hand, if there is no cointegration, then the VECM is reduced to a vector autoregressive (VAR) model, and the Granger causality tests will be used to determine causal links between the variables. Te regression equation form for VECM is given as In the VECM modeling above, the cointegration rank shows the number of cointegrating vectors. For example, a rank of four indicates that four linearly independent combinations of the nonstationary variables will be stationary. Te error correction component (ECM), given as the coefcient of e t−1 , shows the speed of adjustment of the variables towards a long-run equilibrium after short run fuctuations of the variables.

Diagnosis Test.
To estimate a more specifc relationship between public expenditure and economic growth, it is very important to establish whether the estimation coefcients are tenable and whether the extent to the regression coefcients ftted in the model makes the model a liner, unbiased estimator of the impact of government expenditure on economic growth. Te model would be tested to verify the existence of autocorrelation and stationarity efects, which are mostly common in time series data.

Testing Stationary.
To estimate a more specifc relationship between economic growth and components of government expenditure, the researcher is sure that the time series data are stationary. Most economic data are nonstationary (random walk). Tere exists a trend element in which both independent and dependent variables grow upward or decrease downward continuously together [43].
Te common tests used are the Dickey-Fuller (DF) and augmented Dickey-Fuller (ADF) tests. Tese tests are basically required to ascertain a number of times variables have to be diferentiated to arrive at stationarity. Time series data are said to be diferentiated of order "p" if it became stationary after diferentiating it "p" times. Economic variables stationary from the outset are I (0) series which are variables that require to be diferentiated once to be stationary I (1).

Autocorrelation Test.
Autocorrelation is a correlation between members of a series observation ordering in time (as time series data). Te classical linear regression model assumes that the disturbance (error) term relates to any observation. In running OLS estimation, the most important assumption is that the consecutive error terms are not correlated or that there is no autocorrelation. Running OLS estimation by disregarding autocorrelation will result in inefciency in the estimated result, and its standard errors are estimated in the wrong way [43]. Tere are two detecting or testing mechanism formal method like Breusch-Godfrey (BG) test and the Durbin-Watson d test and informal method like graphic method.

Descriptive Statistics.
Annual time series data from 1980 to 2018 are utilized in this study. Gross domestic output, total government spending on defense, health, education, investments, agriculture, and consumer price index are the factors being taken into account. Te other variables are determinant factors of the dependent variable, real gross domestic product (RGDP), whereas RGDP is a dependent variable (see Table 3).
Te description of the variables used in the estimation is shown in the above Due to the assumption that their contribution to growth becomes high with a minimum percentage of total expenditure going to defense, the nation's highest maximum expenditure in this case is going to the main sectors of investment, education, agriculture, and health. Figure 1, the longterm trajectory of real gross domestic product, up until the middle of the 1980s, it fairly declined. Following that, it began to rise until the end of the 1980s before declining once more in the 1990s. Tis drop in real gross domestic product was caused by a ferce power struggle between the Ethiopian government and the EPDRF party during this period. Te economy is sufering because of the war. Finally, sustained ongoing economic expansion characterizes the time since the 2000s.

Trend of Defense Expenditure and Real Gross Domestic
Product. As can be seen from the graph showing the longterm trajectory of defense spending in Figure 2, it increased slightly up until the 1990s before beginning to decline in the second half of the 1990s. Ten, it began to increase dramatically until it reached the year 2000, after which it began to fall sharply. Finally, since the year 2000, defense spending has been steadily rising.

Trend of Agricultural Expenditure and Real Gross
Domestic Product. Figure 3 shows the long-term trend in agricultural spending..

Trend of Health Expenditure and Real Gross Domestic
Product. Figure 4 shows the long-term trend in health spending. It increased until the second half of the 2000s at a dropping rate before beginning to decline again and then at a rising again.

Trend of Educational Expenditure and Real Gross
Domestic Product. Figure 5 shows a graph of the long-term trend in educational spending. It increased at a consistent rate until the 1990s, at which point it began to decline until the 2010s, when it began to rise again. Figure 6 shows the long-term trajectory of investment expenditure. It continued to decline gradually up until the second half of the 1990s, after which it started to decline at an ever-increasing rate until it reached 2000. After that, the graph's wave took on an up-and-down kink, but between 2000 and 2010, it signifcantly declined.

Trend of Consumer Price Index and Real Gross Domestic Product.
As evident from the graph of the Consumer Price Index's long-term trend in Figure 7, up until the year 2000, it began to grow at a decreasing rate before beginning to grow at an increasing rate.            It turns out that the assumptions of no autocorrelation, which are supposed to be broken, turn out to be unviolated. Additionally, the presumption of no misspecifcation is true. Furthermore, diagnostic tests for ARCH and structural break problems show that the null hypothesis cannot be ruled out, suggesting that ARCH does not exist and that the parameters are stable.

Cointegration Analysis.
In order to investigate the long-run relationship between GDP growth and public expenditures in health expenditure (gexphe), agricultural expenditure (gexpagri), defense expenditure (gexpagri), educational expenditure (gexpedu), investment expenditure (gexpinv), and Consumer Price Index (CPI), the variables have to frst be tested for cointegration. If the series are cointegrated, then the corresponding error correction term and an error correction model must be constructed. Te Johansen Cointegration Test is used to determine if the variables co-move towards a long-run equilibrium. Te results in Table 5 suggest that the variables are cointegrated.
Tese fndings indicate that the appropriate model to ft in the data is VECM.

Vector Error Correction Model.
From the cointegration test results presented in Table 5, the following cointegrating relationships were obtained using the Johansen test of cointegration. Te equation is solved through the Johansen test, which was used to confrm the appropriateness of the selected equation. To investigate the long-run efects in this model, the researcher presented the estimated normalized cointegration coefcient vectors in Table 6. From Table 6 With the evidence from the cointegration test, it can be interpreted that economic growth in Ethiopia signifcantly depends on public expenditure on education and health in the long-run. But the relationship between economic growth and public spending on agriculture has a negative and insignifcant impact, and also its relationship with educational spending is positive and signifcant. Te results show that in the long-run, expenditure on investment has a positive coefcient and insignifcant impact on economic growth. In addition to this, the Consumer Price Index is negative and insignifcant.
Te sectorial expenditure on agriculture, investment, defense, and the consumer price index was insignifcant. In line with the result of Liu and Li [44], expenditure on agriculture has a negative impact on Ethiopia's economic growth. Te reason is that the agricultural sector in Ethiopia has faced a lot of challenges like inadequate fnance, poor transportation, inadequate farm inputs, and a lack of land tenure securities over the past few years. Tese challenges led to a decrease in productivity and the standard of living of rural farmers. Tis is because the lack of complementary policies, political instability, unexpected shock and natural hazard, corruption, rent seeking problem by ofcials, having unmotivated civil servants, and poorly administered huge projects result in the unproductive and poor performance of the sector's contribution to growth. Tis result is similar with the previous studies such as [38,45,46] and [47]. But it is against Menyah and Wolde-Rufael [19] and Garoma and Bersisa [48]. However, expenditure on education and health has a positive and statistically signifcant impact on economic growth. Tis may be due to the fact that our country is on the way to declining the health condition and substituting the illiterate society with that of the literate by increasing the accessibility of education to create a healthier and more productive society by producing important medicines domestically through the Medical Corporation (MC) and building the medical capabilities of the country's educated force through identifying existing and potential needs based on research and development. Te health and educational institution is an umbrella organization for multiple institutions, organizations and factories, and become a leading and an emerging institution in registering remediable growth in the area of manufacturing, agriculture and industrial production, hence the contribution of these institution directly improve the real economic growth of the country, indirectly both have a positive impact on economic growth or it promote growth by increasing the gross domestic product. Te other factor that afects GDP in Ethiopia is expenditure on agriculture. It has a negative long-run impact, a result similar to Teshome [38], Garoma and Bersisa [48], and Bazezew and Alemu [49]. Te insignifcant and negative long-run efect of agriculture is especially expected from the perspective of economic theory, policy and strategy of the Ethiopian government, the share of agriculture to GDP in the long run should decline and hence investment on agriculture also should be decreased and probably transformed in to industrial economy. Te government of Ethiopia has a strategy that says agriculture leads the economy in the short run by creating favourable conditions for industry to play a key role and lead the economy in the long run.
From the above long run equation economic growth with respect to government expenditure changes is highly elastic with a 1% change in government expenditure on health sector leading to an increase in economic growth by 5.2% and also government expenditure is highly elastic with a 1% change in government expenditure on educational sector leading to an increase in economic growth by 13%. Te argument of endogenous growth theories of additional efects of human capital over the static efect on the level of output explains sustainable economic growth. But, the coefcient of government expenditure on defense and investment was found to be positive, and Consumer Price Index and agriculture were found to be negative, and all are insignifcant. From Stata's results, most of the signs researchers expect are mammalian, with the exception of agricultural and defense signs.
Te model estimates that the short-run dynamics are mainly driven by lagged real GDP, total government expenditure on education, investment, health, agriculture, defense, and consumer price index sectors. Te short-run coefcients of individual variables should be examined to determine the relative contribution of each component of government expenditure to economic growth in Ethiopia. As shown in Table 7 the coefcient of the frst lagged value of real gross domestic product was positive and insignifcant. Tis indicates, in the short run, that real gross domestic product in the current period is not sensitive to what it was in the previous period.
As to health and education expenditure, the coefcient is positive and signifcant, implying that a 1% increase in education and health spending would lead to an increase in economic growth of 4.593 and 6.171%, respectively, in the short run. Tis may be due to the fact that when the nation becomes literate and healthier, it may build confdence in the government and the society for both private and government investments in which they may contribute to the GDP of the nation, and it may also avoid fear of instability and further damage to the nation's property because the people are educated and healthier. Tis also directly improves the economic growth or it helps growth by strengthening the current account balance of the nation by exporting educated and healthier people.
However, the coefcient of the frst lagged value of expenditure on investment and agriculture was observed to be negative and signifcant in the short run. Te primary reason for these contrary responses pushes us to look into the components of agriculture spending. Salary for the development agents and recurrent expenditure in the sector are very dominant. In such circumstances, the expenditure on the sector may not help the growth of the economy. Te coefcient of the frst lagged value of expenditure on investment also has signifcantly negative efect on economic growth in the short run this shows that the government of the country even spend large amount of capital result in no real economic growth this is because of corruption, access of logistic, lack of good management, lack of cooperation, shortage of basic infrastructure. On the other hand, the coefcient of the frst lagged values of expenditure on defense has an insignifcant efect on economic growth in the short run.
Te coefcient of the error correction term (ECTt − 1) for the economic growth equation is signifcant and positive that is correctly signed and indicates the existence of a longrun relationship amongst the growth model variables. Tis guarantees that although economic growth may temporarily deviate from its long run equilibrium value, it will gradually reach to its equilibrium after a shock. Tis implies that in the event of a deviation between the actual and long-run equilibrium levels, there would be an adjustment back to the long-run relationship in subsequent periods to eliminate this discrepancy. Te coefcient of the error term and/or the speed of adjustment towards equilibrium value are 0.1727, which implies that there is a relatively high speed of adjustment towards long-run equilibrium. Tis indicates that whenever there was a disturbance and/or a shock in the system, 17.27% of the deviation or the discrepancy of the actual economic growth from its equilibrium value is eliminated within a year and/or if there is a one percent disequilibrium or shock in the preceding period, the impact of a shock to change in real GDP is corrected by 17.27% per annum.

Conclusion and Recommendation
Te objective of this paper is to investigate the impacts of specifc government sectorial spending on economic growth. Using a time series data from the years 1980 to 2018, the researcher investigated the growth impact of government sectorial expenditure on health, agriculture, defense, education, investment, and the consumer price on economic growth in Ethiopia. Before estimating the model, the series was frst tested for stationarity and cointegration. After indicating the presence of the long-run relationship using Johansen cointegration approach, the short run dynamics of the long run economic growth is examined by estimating an error correction model. Te researcher fnds that in the short-run the main determinant of economic growth is spending on agriculture, education, health, and investment during the study period. On the other hand, the cointegration analysis indicated that the main driving forces behind long-run growth are spending on education and health, while spending on defense and the consumer price index become insignifcant both in the short and long-run. Total government expenditure on defense does not have a signifcant efect on the economy of the country both in the short-run and long-run.
On the other hand, expenditure on health has a positive impact on economic growth both in the long-run and shortrun periods and it is also signifcant both in the long-run and short-run. Moreover, the result shows that expenditure on education contributes to increase in the economic growth. Education not only contributes to economic growth but also the general development of society. In this regard, the researcher's main fnding is that education and health are the key sectors in which public expenditure should be directed in order to foster economic growth in the long run.
Tis study recommended that the government of Ethiopia should spend on human capital (education sector) that contributes signifcantly to economic growth. In addition, government expenditure on health has a positive and signifcant efect on economic growth in both the short and long run; therefore, government should increase spending on the health sector because expenditure in these sectors improves the health status of the people and enhances economic growth in the country.

Data Availability
Te datasets and articles used to support this study are available from the corresponding author upon reasonable request.

Conflicts of Interest
Te authors declare that they have no conficts of interest.