Monday, 1 July 2013
Public finances and economic growth in Nigeria
11:40
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Suleiman A.S. Aruwa
(Nigeria)
Public finances and
economic growth in Nigeria
Abstract
Examining the empirical
relationship between government revenues and expenditures, expenditures and
economic growth is a fundamental step in understanding the behavior of Nigerian
public expenditure and the economy on the basis of Wagner’s law or the Keynesian
theory and Friedman (1978) or Peacock and Wiseman’s (1979) revenue-spend and
spend-revenue hypotheses. The study tests for the stationarity properties of
the time series public finance data of the Federal Government of Nigeria
(1979-2008) using the Augmented Dickey-Fuller (ADF) test. The Johansen’s
cointegration test is conducted to determine whether a group of non-stationary
time series variables used for this study is cointegrated or not. The VAR-based
Error Correction Model is used as test for causality. The study have found that
growths in both real gross domestic and government revenue causes growth in
government expenditure. The implication is that government expenditure is not
employed as a fiscal instrument and the revenue growth drives the government
expenditure for the study period. The volatility in oil-driven revenue profile
of Nigeria requires public expenditure management reforms and the need to check
the productiveness of government expenditure and diversify the revenue drive.
Keywords: government
expenditure, revenue and real GDP.
JEL Classification: H72,
O40.
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