The Effect of Fiscal Policy on Economic Growth in Zambia (1990 to 2020)

Abstract

This research investigates the impact of fiscal policy on Zambia's economic growth from 1990 to 2020. Employing time series data and econometric analyses, the study examines the roles of government expenditure, taxation, and public debt in shaping economic performance. Key methodologies include the Autoregressive Distributed Lag (ARDL) model, Error Correction Model (ECM), and Granger causality tests to establish short- and long-term relationships. Results reveal that public expenditure significantly influences economic growth, with causality running from expenditure to growth, supporting Keynesian economic theory. However, challenges such as high public debt, weak tax systems, and inefficient spending limit fiscal policy's effectiveness. The findings underscore the need for targeted public expenditure and improved fiscal discipline to enhance economic stability and growth. Recommendations emphasize public-private partnerships and sector-specific evaluations to optimize fiscal policy impacts.