Fiscal indicators for economic growth: The government own saving concept re-examined

The search for ways to protect growth while accommodating necessary expenditure cuts to correct fiscal imbalances has often led to the advocacy of the government own savings measure as an indicator of growth potential in fiscal adjustment. This paper critically examines the rationale of this approach and particularly the empirical underpinning for its implicit assumption of the overriding importance of capital expenditure for growth. In light of the problems revealed in the GOS approach, the paper explores the possiblity of alternative weighted expenditure indicators.