The government expenditure-economic growth relation in Japan: an analysis by using the ADL test for threshold cointegration

Based on annual data from Japan for the period 1960 to 2010, we investigate the government expenditure-economic growth relation in Japan by using the autoregressive distributed lag test for threshold cointegration developed by Li and Lee (2010). In particular, we evaluate the validity of Wagner's view and the Keynesian view in the case of Japan. The empirical results presented herein indicate that of these two classical economics perspectives, only Wagner's view holds for Japan. The findings also demonstrate that the adjustment process towards its long-run equilibrium is asymmetric.