In this research, we will use Malaysia as our focus country to determine the factors that will affect the growth in government expenditure. There will be four variables, which included one dependent variable that is government expenditure (G) and three independent variables – inflation rate (%), population growth rate (%) and public debts growth rate (%). Our research is to study the relationship between inflation rate, population growth rate and public debts growth rate with government expenditure rate. When there are changes in inflation rate, population growth rate and public debts growth rate, how it would affect the government expenditure (G) to grow or to decline. There are many researches about this topic has been discussed before this. According to a C.Okafor and O.Eiya (2011), they looked at empirical data in Nigeria from year 1999 to 2008 and found that inflation rate has a negative relationship with government expenditure, while population growth rate and public debts growth rate has a significant positive relationship with government expenditure. Therefore,we will review some key studies on the relationship between inflation rate, population growth rate and public debts growth rate with government expenditure by providing logical explanation on the direction of the relationship between those dependent and independent variables. Thus, we will conduct an empirical study by using twenty years of annually data. Research Problem
Government Spending in Malaysia increased to 33,624 MYR Million in the fourth quarter of 2012 from 22,706 MYR Million in the third quarter of 2012. Historically, from 2005 until 2012, Malaysia Government Spending averaged 19,644.82 MYR Million reaching an all-time high of 33,624 MYR Million in November of 2012 and a record low of 12,420 MYR Million in February of 2005. The government expenditure in Malaysia is reported by the Department of Statistics, Malaysia. It shows the increments of the government expenditure from year to year. The increments of the government expenditure might be affected by the 3 determinants of government expenditures which are inflation rate, public debts growth rate and population growth rate。 Therefore, the main core of the proposal is to investigate the relationship between inflation rate, public debts growth rate and population growth rate with government expenditure rate. The research can be used as a reference to the government sector for achieving an efficient policy implementation in the future. Research Objectives
a) To study the relationship between inflation rate, public debts growth rate and population growth rate with government expenditure rate. b) To determine the recommended ways to solve the economic issue of the determinant of government expenditure rate. Significant of Study
This topic would give us a clear picture on how government uses policy to reduce the rate of inflation and public debt and also increase the rate of population. The purchasing power of consumers will decrease when inflation happens in economy and it may be caused by social problem due to financial condition. If the rate of public debt increases from time to time, then it will be the burden of the future generation because government will impose a higher rate of income tax as collective revenue to cover the debts. Government will spend more money to maximize the public welfare when the population growth rate is increasing, so the government expenditure will increase as well. According to Wagner’s law and Peacock-Wiseman (1961) hypothesis emphasize on the fact that public expenditure has tendency to increase overtime as the economy developed. To the researcher and the other researchers, for those who are doing related topic can get more experiences and further knowledge on the proper procedure to undergo a proper research. Besides that, for those, who are doing research, are able to refer to this research as a guideline for their future research in other...