Investigating the Impact of Government Size on Gross Domestic Product in Afghanistan Using the Vector Regression (VAR) Model

Abstract

Governments in terms of intervention in the economics of classical government begin and end in centralized planning government. The relationship between government spending and GDP is also unclear in economic theories. The statistics and performance of some developed and developing economies in the last few decades indicate that exceeding the size of the government required to provide basic services leads to a decline in GDP. The main purpose of this research is to investigate the effect of government size on the GDP of Afghanistan based on the data of 1381–1958. For this purpose, the effects of state size have been investigated using the vector self-regression (VAR) model. Overall, the results indicate that the relationship between government size, total spending and GDP has a positive significant relationship. On the contrary, there is a significant negative relationship between labor and GDP, one of which is the lack of skilled labor in Afghanistan.