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This article seeks to empirically examine the dynamic relationship between government expenditure and private sector investment in South Africa. The research employed a Vector Autoregression (VAR) methodology to experimentally investigate the crowding impacts of government spending on private sector investment, utilising time series data from 1960 to 2021. The study evaluates single equation methods, including Dynamic Ordinary Least Squares, Fully Modified Ordinary Least Squares, and Canonical Cointegrating Regression, to analyse the long-term cointegrating relationship between government expenditure and private sector investment. The results offer robust empirical evidence of a beneficial relationship between government expenditure and private sector investment, suggesting that an increase in government spending stimulates private sector investment in South Africa's economy. The impulse response function (IRF) indicated that private sector investment reacts favourably to unexpected fluctuations in government expenditure and GDP growth. The study's findings indicate that governments should allocate substantial funds to productive sectors to stimulate economic activities, encourage private sector investment through robust public-sector collaboration, and ultimately promote job creation and economic growth.

This paper investigates whether government consumption becomes more growth-enhancing after institutional capacity crosses a minimum level in North Africa. Government consumption is a narrower measure than total public expenditure and excludes some capital spending and transfers. A panel of Algeria, Egypt, Libya, Mauritania, Morocco, Sudan, and Tunisia for 2003–2024 is assembled from the World Development Indicators and Worldwide Governance Indicators. The empirical design profiles candidate threshold values separately for government effectiveness and control of corruption in a dynamic common-factor panel model. It enforces a 15% minimum regime share and uses all 128 country-level Rademacher sign assignments for wild-cluster threshold tests. Candidate breakpoints occur at −1.336 for government effectiveness and −1.267 for corruption control. Conditional spending-growth slopes are larger above both candidates, but the threshold tests do not reject linearity (p = 0.217 and p = 0.388). Cutoffs and regime slopes also move substantially when Libya or Sudan is excluded, when the five-country core is used, and across alternative time windows. H1–H3 are therefore not supported: the evidence does not identify a stable institutional minimum at which public consumption reliably changes its growth effect. Policy should improve specific expenditure-conversion mechanisms rather than treat sample-specific governance breakpoints as targets.

This paper investigates whether government consumption becomes more growth-enhancing after institutional capacity crosses a minimum level in North Africa. Government consumption is a narrower measure than total public expenditure and excludes some capital spending and transfers. A panel of Algeria, Egypt, Libya, Mauritania, Morocco, Sudan, and Tunisia for 2003–2024 is assembled from the World Development Indicators and Worldwide Governance Indicators. The empirical design profiles candidate threshold values separately for government effectiveness and control of corruption in a dynamic common-factor panel model. It enforces a 15% minimum regime share and uses all 128 country-level Rademacher sign assignments for wild-cluster threshold tests. Candidate breakpoints occur at −1.336 for government effectiveness and −1.267 for corruption control. Conditional spending-growth slopes are larger above both candidates, but the threshold tests do not reject linearity (p = 0.217 and p = 0.388). Cutoffs and regime slopes also move substantially when Libya or Sudan is excluded, when the five-country core is used, and across alternative time windows. H1–H3 are therefore not supported: the evidence does not identify a stable institutional minimum at which public consumption reliably changes its growth effect. Policy should improve specific expenditure-conversion mechanisms rather than treat sample-specific governance breakpoints as targets.

This article seeks to empirically examine the dynamic relationship between government expenditure and private sector investment in South Africa. The research employed a Vector Autoregression (VAR) methodology to experimentally investigate the crowding impacts of government spending on private sector investment, utilising time series data from 1960 to 2021. The study evaluates single equation methods, including Dynamic Ordinary Least Squares, Fully Modified Ordinary Least Squares, and Canonical Cointegrating Regression, to analyse the long-term cointegrating relationship between government expenditure and private sector investment. The results offer robust empirical evidence of a beneficial relationship between government expenditure and private sector investment, suggesting that an increase in government spending stimulates private sector investment in South Africa's economy. The impulse response function (IRF) indicated that private sector investment reacts favourably to unexpected fluctuations in government expenditure and GDP growth. The study's findings indicate that governments should allocate substantial funds to productive sectors to stimulate economic activities, encourage private sector investment through robust public-sector collaboration, and ultimately promote job creation and economic growth.