ANALYSING FISCAL POLICY AND ECONOMIC GROWTH: INSIGHT FROM THE GAMBIA

Abstract

This study uses the Autoregressive Distributed Lag model to investigate how fiscal policy influences economic growth in the Gambia. Findings confirm the significant relationship between fiscal policy rate and economic growth in both the short and long run, and gross fixed capital formation exhibits a negative and statistically significant relationship with economic growth. Additionally, the impact of public debt in the short term was non-significant but substantial in the long run. Furthermore, government expenditure substantially impacts growth in both the short and long run, and the causality test proved that the variables show a one-way causation on economic growth. The study recommends that policy-making decisions to pay attention to policies that will intensify the efficiency of fiscal policy rates to support and expand the rate of growth. Tax policy arrangements and implementations should be reviewed, and the accrued revenue should be reinvested into areas that will improve human capital and infrastructure development. On public debt, the focus should be on productive or tied to investments that will generate high returns at a reasonable payback period to avoid debt overhang.