Granger causality is tested for to examine the exogeneity of GDP which is a
ssumed in previous research on the determinants of aggregate health care sp
ending. In theory, the causal relationship between these variables could be
in either or both directions. For some of the 20 OECD countries tested it
appears that health care expenditure Granger causes GDP, and vice versa for
others. Therefore care must be taken when specifying health care expenditu
re and growth equations respectively in defining the appropriate 'independe
nt' (and exogenous) and 'dependent' variables. In particular, these results
suggest that standard models of aggregate health care expenditure may be m
isspecified.