Health Expenditure and Economic Growth Nexus: Empirical Evidence from South Asian Countries

Abstract

This study aims to empirically investigate the short-term and long-term effects of healthcare expenditure, institutional quality and domestic and foreign investments on the economic growth of South Asian countries during the period 1996–2018. The pooled ordinary least squares (OLS) and random effects models, Johansen–Fisher cointegration test and Granger causality test have been employed to assess the short-term and long-term relationships and the direction of causality among the variables. The cointegration tests indicate the existence of a long-term equilibrium among the variables. The results reveal that there runs a bidirectional causality from health expenditure to economic growth in the concerned countries in the short run. Further, institutional quality is seen to have a unidirectional effect on health expenditure. Therefore, the authorities of the South Asian nations are required to strengthen the accessibility to and affordability and accountability of the healthcare services being provided to their population.