The impact of fiscal policy on economic growth in Malawi

Abstract

This study investigates the impact of fiscal policy on economic growth Malawi. In order to achieve the outcomes of this study, time series data from the year 1981-2014 has been used. VAR model has been used in order to capture the linear interdependence among multiple time series. The results of this study confirm that proper budget structure leads to growth of the economy both in short-run and long run. Thus, the expenditure on Education, Science and Technology will have more value provided that the Agriculture and Food Security is kept intact as it is the main source of revenue for the country. It has been noted that the deficit gap can only be closed if the country widens its source of revenue as reliance on agriculture is becoming unstable due to climate change. The government has to put much emphasis on Energy, Industrial Development, Mining and Tourism as its main sources of revenue though the projection in 2016-2017 has seen a decrease between 4% and 2% respectively.