Growth and Productivity; The Role of Budget Deficit in the MENA Selected Countries

Abstract

Today, efficiency is considered as one of the most effective ways of increasing economic growth by many planners and economic policy makers in different countries; further, huge investments made in this regard. On the other hand, the issue of budget deficit was introduced in economic literature since 1980s. Within this decade, current budget deficit significantly increased in the USA. Emerging of this phenomenon prompted many economists to establish public sector as the macroeconomic unbalancing factor, on the contrary to Keynesy who regarded public sector as the balance factor, particularly in developing countries since developing countries deal with specific problems such as foreign debt, high inflation, difficulties of payment balances, exchange parallel markets as well as various external shocks. Therefore, this research tried to study the effect of growth, efficiency and government budget deficit in MENA selected countries within 2000-2013 by using the recommended static panel models. Results of the estimated relations for the first model in which government budget deficit is the dependent variable indicate positive effect of economic growth and inflation rate variables as well as the negative effect of labor productivity and government budget deficit. Moreover, the second model in which economic growth is the dependent variable demonstrates the positive effect of labor productivity index and economic growth. In addition, negative correlation of government budget deficit with economic growth is also maintained.