The Impact of Government Expenditure Structure on Economic Growth in CEE Countries

This paper examines the impact of public expenditure composition on economic growth in thirteen Central and Eastern European countries from 2000 to 2023. Using panel ARDL and CS-ARDL approaches, the study finds a robust positive long-run role for capital formation, while the estimated contribution of labor varies across specifications and public expenditure composition matters. Government consumption is deleterious in the long term, while public investment has an indirect implication for growth through private capital formation. The findings show that fiscal policy needs to focus on the quality and efficiency of public investment and reducing excessive current expenditure.