Page 523 - 2016 - Vol. 40

interest spending, the ratio of government expenditure to
GDP is multiplied by the GDP at current prices, and finally
deflated. The relationship between public expenditure and
GDP, investigated the yearly observations from (1970-
2003) for 15 European Union countries. Data are taken
from the Annual Macroeconomic database of the European
Commission (AMECO). All data are expressed at constant
1995 prices and denominated in common currency (ECU).
Expenditure data are net of interest expenditure and are
adjusted for the cycle. GDP data refer to potential GDP.
Potential GDP series are obtained by means of the
production function approach, i.e., potential output is
estimated starting from an assumed aggregate production
function for the economy and estimates of the capital stock,
labor inputs and total factor productivity (Denisl, 2002).

Over the past few decades, exports have played a
vital role in the economic growth of LDCS. According to
Jung and Marshal (1983), the 1977s have witnessed an
emerging consensus in favor of exports promotion. In-
depth analysis of individual country experiences has
provided extensive supports for exports promotion as an
effective development strategy. Furthermore, in discussing
trade strategies, perhaps the hypothesis of widest interest is

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