The main focus of this study is to investigate the impact of expansion in economic growth on
government expenditure in Nigeria covering the periods 1970 to 2012. Gross Domestic Product (GDP) was
used as a proxy for economic growth, and the GDP time series was decomposed using the partial sum approach
in order to achieve asymmetry in the variable. The asymmetric ARDL estimation technique was appropriately
employed in this study. The findings of this study revealed that expansion in economic growth has significant
impact on government expenditure in Nigeria. The study further provided evidence of long-run causality from
boom/expansion in economic growth to government expenditure in Nigeria but could not support any evidence
of short-run causality. The researcher recommended among others, that Governments in Nigeria should give
more impetus to policies that will guarantee sustainable economic growth.
Using time series data, this study investigated the effect of aggregated and disaggregated public spending on economic growth in Nigeria during the period 1980 – 2015. Time series data such as aggregated expenditure proxy by total federal government expenditure (TFGE), disaggregated expenditure proxy by recurrent expenditure (REXP) and capital expenditure (CEXP,) and economic growth proxy by GDP were obtained from central bank of Nigeria (CBN) statistical bulletin. Error Correction Model (ECM) was used to estimate the model. The result of the finding revealed that the total federal government expenditure (TFGE) and capital expenditure (CEXP) exerts positive and significant influences on GDP while recurrent expenditure (REXP) has a positive and insignificant influence on GDP. This implies that the higher the public spending, the higher the GDP. The researchers therefore, recommend that for sustainable Economic Growth (GDP), federal government should increase capital expenditure by allocating more funds to the productive sector of the economy. More so, the positive contributions of public spending to economic growth necessitate the continued use of fiscal policy instruments to pursue macroeconomic objectives in Nigeria.
Government Expenditure and Economic Growth Nexus: Empirical Evidence from Nig...iosrjce
This study has examined the impact of public expenditure on economic growth in Nigeria using time
series data for the period 1970-2012. Secondary data were sourced from the CBN, NBS, journals, text books
etc. The adopted model was fitted with three variables: real GDP, capital and recurrent expenditure. The tools
of analysis were the ADF unit root test and ordinary least square multiple regression accompanied by pairwise
Granger causality test. The major objective of this study is to analyse the impact as well as direction of
causality between the fiscal variables and economic growth. All the variables included in the model are
stationary at level. Empirical findings from the study show that there is positive and insignificant relationship
between capital expenditure and economic growth while recurrent expenditure had a significant positive impact
on economic growth. Also, Granger causality test demonstrates a unidirectional causality running from the
fiscal variables to economic growth in validation of the Keynesian theory. Consequently, the study
recommended more allocation of resources for recurrent purposes as well; government should establish the
body that will monitor contract awarding process of capital projects closely, to guard against over estimation of
project cost and stealing of public funds.
Abstract: The paper examines the impact of public sectoral expenditure on economic growth in Nigeria for the period 1981-2013. It was observed that the growth of government expenditure has not fully felt by the economy. The econometric methodology employed is the ARDL model and results show that while the impact of government expenditure on administration and debt servicing were positive on economic growth in the long and short run, expenditure on economic and social sectors has negative impact. We argue that this may not be unconnected with the high level of corruption prevalent in the public sector where funds that are meant for provision or maintenance of social-economic activities like agriculture, roads, transportations, schools and hospitals are diverted for personal use. The CUSUM and CUSUMSQ test show the model is stable as neither of them cross the 5% boundary. The paper recommended that government should increase expenditure to the social and economic sectors while debts or debt servicing should be reduced. Also, corruption so prevalent in the public sector must be minimized if cannot be eradicated.
Using time series data, this study investigated the effect of aggregated and disaggregated public spending on economic growth in Nigeria during the period 1980 – 2015. Time series data such as aggregated expenditure proxy by total federal government expenditure (TFGE), disaggregated expenditure proxy by recurrent expenditure (REXP) and capital expenditure (CEXP,) and economic growth proxy by GDP were obtained from central bank of Nigeria (CBN) statistical bulletin. Error Correction Model (ECM) was used to estimate the model. The result of the finding revealed that the total federal government expenditure (TFGE) and capital expenditure (CEXP) exerts positive and significant influences on GDP while recurrent expenditure (REXP) has a positive and insignificant influence on GDP. This implies that the higher the public spending, the higher the GDP. The researchers therefore, recommend that for sustainable Economic Growth (GDP), federal government should increase capital expenditure by allocating more funds to the productive sector of the economy. More so, the positive contributions of public spending to economic growth necessitate the continued use of fiscal policy instruments to pursue macroeconomic objectives in Nigeria.
Government Expenditure and Economic Growth Nexus: Empirical Evidence from Nig...iosrjce
This study has examined the impact of public expenditure on economic growth in Nigeria using time
series data for the period 1970-2012. Secondary data were sourced from the CBN, NBS, journals, text books
etc. The adopted model was fitted with three variables: real GDP, capital and recurrent expenditure. The tools
of analysis were the ADF unit root test and ordinary least square multiple regression accompanied by pairwise
Granger causality test. The major objective of this study is to analyse the impact as well as direction of
causality between the fiscal variables and economic growth. All the variables included in the model are
stationary at level. Empirical findings from the study show that there is positive and insignificant relationship
between capital expenditure and economic growth while recurrent expenditure had a significant positive impact
on economic growth. Also, Granger causality test demonstrates a unidirectional causality running from the
fiscal variables to economic growth in validation of the Keynesian theory. Consequently, the study
recommended more allocation of resources for recurrent purposes as well; government should establish the
body that will monitor contract awarding process of capital projects closely, to guard against over estimation of
project cost and stealing of public funds.
Abstract: The paper examines the impact of public sectoral expenditure on economic growth in Nigeria for the period 1981-2013. It was observed that the growth of government expenditure has not fully felt by the economy. The econometric methodology employed is the ARDL model and results show that while the impact of government expenditure on administration and debt servicing were positive on economic growth in the long and short run, expenditure on economic and social sectors has negative impact. We argue that this may not be unconnected with the high level of corruption prevalent in the public sector where funds that are meant for provision or maintenance of social-economic activities like agriculture, roads, transportations, schools and hospitals are diverted for personal use. The CUSUM and CUSUMSQ test show the model is stable as neither of them cross the 5% boundary. The paper recommended that government should increase expenditure to the social and economic sectors while debts or debt servicing should be reduced. Also, corruption so prevalent in the public sector must be minimized if cannot be eradicated.
The spending allocation pattern of national governments varies depending on public policy for
desired effects but the outcome is rather controversial according to existing literature. This research aims to
explore the relationship between government expenditure, economic development and economic growth in
Brazil from 1994 to 2017. The Human Development Indicator (HDI) index is a representative measure of
economic development and is comprised of three dimensions:
Effect of budget deficits on economic growthNigus Temare
The main objective of this study was to investigate the effect of budget deficit on economic growth in Ethiopia. For this purpose, the study used time series secondary data, and the data was extracted from the World Bank development indicators, Ministry of Finance, and National Planning and Development Commission of Ethiopia. The data covered a period running from 1994 to 2020.The study employed the Autoregressive Distributed Lag (ARDL) co-integration technique to determine the long and short-run relationship between budget deficit and economic growth. The findings resulted from modeling and analysis of the study showed that there exists a negative relationship between budget deficit and economic growth in Ethiopia and these results are consistent with the neoclassical economist schools of thought. Besides, the inflation rate is affecting the economic growth negatively and significantly whereas, government expenditure and trade openness affect the economy positively and statistically significant in the long run. On the other hand, the analysis in the short-run revealed that the budget deficit is positive but statistically insignificant. This indicates that budget deficit changes have no immediate effect on economic growth. The study suggested some policies which are important for the government of Ethiopia to avoid certain levels of the budget deficit to achieve the desired level of growth.
All the information about the fiscal policy is provided in this slide for ever BBA student it is easy to understand the fiscal policy and its terms and types INFORMATION FOR CLASS PROJECTS AND CLASS PRESENTATION
Revisiting the link between government spending and economic growth in the pr...iosrjce
This paper aims to revisit the link between government spending and economic growth in the present
of Wagner’s Law in Nigeria from 1972-2011. The examination is based on the functional form of Wagner Law
augmented by incorporating the square of GDP. We employed ARDL bound testing, combine cointegration and
Toda-Yamamoto non- Granger causality test in this study. Cointegration was found in both methods, and the
causality test supports the presence of Wagner’ Law. However, increase in GDP (i.e. Square of GDP) has an
adverse impact on economic growth. This shows that GDP as a proxy for economic growth has a certain point
from which, any additional increase will reduce government spending. Therefore, the government needs to come
up with programs that will motivate small and medium enterprises at all levels of government. Hence, the
increase in GDP in the long run, tend to reduce government expenditure, which in turn prevents deficit
financing
The spending allocation pattern of national governments varies depending on public policy for
desired effects but the outcome is rather controversial according to existing literature. This research aims to
explore the relationship between government expenditure, economic development and economic growth in
Brazil from 1994 to 2017. The Human Development Indicator (HDI) index is a representative measure of
economic development and is comprised of three dimensions:
Effect of budget deficits on economic growthNigus Temare
The main objective of this study was to investigate the effect of budget deficit on economic growth in Ethiopia. For this purpose, the study used time series secondary data, and the data was extracted from the World Bank development indicators, Ministry of Finance, and National Planning and Development Commission of Ethiopia. The data covered a period running from 1994 to 2020.The study employed the Autoregressive Distributed Lag (ARDL) co-integration technique to determine the long and short-run relationship between budget deficit and economic growth. The findings resulted from modeling and analysis of the study showed that there exists a negative relationship between budget deficit and economic growth in Ethiopia and these results are consistent with the neoclassical economist schools of thought. Besides, the inflation rate is affecting the economic growth negatively and significantly whereas, government expenditure and trade openness affect the economy positively and statistically significant in the long run. On the other hand, the analysis in the short-run revealed that the budget deficit is positive but statistically insignificant. This indicates that budget deficit changes have no immediate effect on economic growth. The study suggested some policies which are important for the government of Ethiopia to avoid certain levels of the budget deficit to achieve the desired level of growth.
All the information about the fiscal policy is provided in this slide for ever BBA student it is easy to understand the fiscal policy and its terms and types INFORMATION FOR CLASS PROJECTS AND CLASS PRESENTATION
Revisiting the link between government spending and economic growth in the pr...iosrjce
This paper aims to revisit the link between government spending and economic growth in the present
of Wagner’s Law in Nigeria from 1972-2011. The examination is based on the functional form of Wagner Law
augmented by incorporating the square of GDP. We employed ARDL bound testing, combine cointegration and
Toda-Yamamoto non- Granger causality test in this study. Cointegration was found in both methods, and the
causality test supports the presence of Wagner’ Law. However, increase in GDP (i.e. Square of GDP) has an
adverse impact on economic growth. This shows that GDP as a proxy for economic growth has a certain point
from which, any additional increase will reduce government spending. Therefore, the government needs to come
up with programs that will motivate small and medium enterprises at all levels of government. Hence, the
increase in GDP in the long run, tend to reduce government expenditure, which in turn prevents deficit
financing
Financial Development and Economic Growth Nexus in Nigeriaiosrjce
The study assessed the impact of financial development on economic growth in Nigeria using time
series data from 1970 to 2012. The Autoregressive Distributed Lag bounds testing approach to cointegration
was utilized for this study. The result from the ARDL model indicate that the variables for this study are
cointegrated while the error correction term appeared significant and confirms that short-run disequilibria are
corrected up to about 50 percent annually. The empirical results reveals that financial development exerts
positive and significant impact on economic growth in the long-run while trade liberalization variables exert
negative impact on economic growth in the long-run indicating non-competitive nature of non-oil domestic
products in the international market. In the short-run, domestic credit is insignificant which indicates a dearth
of investible funds in the economy. There is evidence that financial development policies influence economic
growth in the long-run and not in the short-run. This study among others recommends the urgent need to
implement policies that will strengthen the deposit mobilization and intermediation efforts in the banking system
in other to deepen the financial system. Nigerian trade performance should be improved through economic
diversification and further availability of funds to private sector at competitive interest rate in order to produce
internationally competitive products.
Financial Liberalisation and Economic Growth In Nigeria: An Empirical Analysisiosrjce
The purpose of this study is to empirically examine the financial liberalization experience in
Nigeria. In particular, the study analyses the motivation for implementing a financial liberalization policy;
providing an explanation of the evolution and process of the financial liberalization. This study establishes the
long-run and short-run relationship between financial liberalization and real output using the ARDL framework
with annual observations over the period 1981-2012. The study uses three measures as proxies to indicate the
degree of financial liberalization: KAOPEN-a financial openness index; money supply as a ratio of GDP, M2;
and credit to the private sector as a ratio of GDP, CPS. The results obtained suggest that there is a positive
long-run equilibrium relationship between financial liberalization and economic growth. This supports the view
that financial liberalization plays a crucial role in the process of economic development; the financial
liberalization process in Nigeria has stimulated financial development leading to significant contribution to
economic growth. Therefore, since financial development seems important to economic growth, measures
should be taken to reduce government inefficiencies in order to release resources for the development of
financial institutions
Tác giả sử dụng mô hình GJR-GARCH và ARDL nghiên cứu với dữ liệu chuỗi thời gian bằng phương pháp thống kê và phân tích định lượng để đánh giá các tác động trên có xem xét tính đến độ trễ và các cú sốc thông tin trên thị trường
The research paper covers univariate and bivariate analysis, to study the relationship between Crude Oil and Bitcoin prices. Univariate analysis involved the study on effect of past price of bitcoin on it's future values using ARDL models. Multivariate analysis involved the estimation of causality among the variables and modeling the relationship accordingly. Breakpoint model was incorporated in order to capture the high volatility in the price of Bitcoin over the years.
Abstract: The theoretical relationship of the long-run equilibrium between real exchange rates and interest rate differentials is essentially derived from the Purchasing Power Parity (PPP) and the uncovered interest parity. However, empirical evidence on this long-run relationship has rather been inconclusive. While several authors are able to establish the long-run relationship between real exchange rates and interest rate differentials other could not found this relationship. The reason for lack of relationship in some of the studies is as a result of omitted variables (Meese and Rogoff, 1988). Therefore, attempt is made in this study to evaluate this relationship between real exchange rate and interest rate differential for the case of Nigeria by controlling for foreign exchange reserves. The paper uses monthly data for the period 1993:1-2012:12 and applies Autoregressive Distributed Lags (ARDL) model. The estimates suggest the existence of long-run relationship between real exchange rate, interest rate differential and foreign exchange reserves. In the long run, the exchange rate coefficient has a positive effect on the foreign reserves. However, the effect of interest rate differential is negative and statistically significant. On the short run dynamics, the finding indicates a non-monotonic relationship between real exchange rate, interest rate differential and foreign exchange reserves. The out-of-sample forecast indicates a better forecast using ARMA model as all Theil coefficients are close zero for all the horizons used in the model.
ARDL test...Tire Lyna is the only tire casing product that has been tested and passed by ARDL, one of the most recognized labs in the world for tire/rubber testing. The test was based on OEM test standards and TMC RP.
This test is a very powerful tool and MUST be used with ever potential customer.
ARDL test,,,EXECUTIVE SUMMARY:
The purpose of this work is to determine the effect of Tire Lyna on tire durability (particularly its effect on the inner-liner and plycoat compounds). The effect was measured on roadwheel tested tires with and without Tire Lyna. The tire integrity was measured by shearography before and after roadwheel testing. The tire surface running temperatures and inflation pressures were monitored. Tire component (innerliner and plycoat) mechanical properties were measured in new and tested tire with and without Tire Lyna.
The tire tread and sidewall surface temperatures were measured as a function of roadwheel time. The tire inflation pressures were measured as a function of roadwheel time. Slightly better pressure in the tire with Tire Lyna was observed at 15 days and at the end of the roadwheel testing.
The innerliner from the tire with Tire Lyna had slightly higher tensile strength and elongation to break, and slightly lower modulus than the tire without Tire Lyna. The tire with Tire Lyna had (significantly improved) lower hardness than the tire without Tire Lyna. The improved property retention is attributed to protection against oxidation provided by Tire Lyna
Ambient temperature was measured at each tire, both tires were within ASTM ambient temperature specification. JHNB1-22-2 (without Tire Lyna) starting conditions were 100PSI /90.5T andJHNB1- 22-1(with Tire Lyna) starting conditions were 100PSI /95.2°F. Average temperature during the roadwheel test for JHNB1-22-2 (without Tire Lyna) was 99.3°F and the average temperature for JHNB1-22-1(with Tire Lyna) was 100.4°F. At the end of the roadwheel test, tire JHNB1-22-2 (without Tire Lyna) had 108PSI at 100.2°F and tire JHNB1-22-1(with Tire Lyna) had 110PSI at 98.5°F. Slightly better pressure in the tire with Tire Lyna was observed.
The test started with Tire Lyna tire being higher in temperature. During the test the tire without Tire Lyna went up to 99.3F. An increase of 8.86% and the tire with Tire Lyna went up by 5.18%. At the end of the test the tire without Tire Lyna was recorded at 100.2F. An increase of 9.68%. At the end of the test the tire with Tire Lyna was recorded at 98.5 F. A decrease in temperature by almost 2%. The tire inflation pressures are shown in Figure 9. The tire with Tire Lyna provided consistently better (higher) inflation pressure retention during and at the end of the roadwheel testing
It clearly shows and proves that the tire with Tire Lyna will run cooler and if compared to tires run in the real world without Tire Lyna the temperature difference witnessed has been as high as 20%. Tire temperatures varies on speed, elevati
Analyzing the Effect of Government Expenditure on Inflation Rate in Nigeria 1...ijtsrd
Nigeria is a developing economy with active participation of the federal government in various economic sectors not only to promote economic growth and development but also to instill fiscal and economic discipline in the economy. Government participation in the economy means greater funding of economic activities and this is expected to impact on economic indicators. This study analyses the effect of government expenditure on inflation rate in Nigeria within a period of 39 years spanning 1981 2019 . The study specifically seek to ascertain, determine, explore and assess the extent to which government expenditures on key sectors of agriculture, education, health and telecommunications respectively affect inflation rate in Nigeria. In line with the specific objectives of this study, four research questions are raised and four hypotheses duly formulated. Data used for this study were collected from the Central Bank of Nigeria CBN Statistical Bulletin. Government Expenditure on Agriculture GOA , Government Expenditure on Education GOE , Government Expenditure on Health GOH and Government Expenditure on Telecommunication GOT are the independent variables while inflation rate INF is the dependent variable. Descriptive statistics, diagnostic test employing the Augmented Dickey Fuller and a multivariate regression based on Johanson Cointegration and Error Correction Model ECM are used to analyze the data. Our findings indicate that government expenditures on education and agriculture have positive but insignificant effect on inflation rate and on the other hand, government expenditure on health and government expenditure on telecommunications have positive and significant effect on inflation rate. Based on our findings, the study recommends that government should increase its allocation to the health and education sectors to trigger increased skills and healthcare of economic operators for enhanced human capital development and economic productivity. Government should also provide adequate infrastructures to facilitate economic growth and reduce high inflation rate. Mbanefo, Patrick Amaechi | Atueyi, Chidi Leonard "Analyzing the Effect of Government Expenditure on Inflation Rate in Nigeria (1981-2019)" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-6 | Issue-2 , February 2022, URL: https://www.ijtsrd.com/papers/ijtsrd49237.pdf Paper URL: https://www.ijtsrd.com/management/management-development/49237/analyzing-the-effect-of-government-expenditure-on-inflation-rate-in-nigeria-19812019/mbanefo-patrick-amaechi
The paper examines the impact of public sectoral expenditure on economic growth in Nigeria for the period 1981-2013. It was observed that the growth of government expenditure has not fully felt by the economy. The econometric methodology employed is the ARDL model and results show that while the impact of government expenditure on administration and debt servicing were positive on economic growth in the long and short run, expenditure on economic and social sectors has negative impact. We argue that this may not be unconnected with the high level of corruption prevalent in the public sector where funds that are meant for provision or maintenance of social-economic activities like agriculture, roads, transportations, schools and hospitals are diverted for personal use. The CUSUM and CUSUMSQ test show the model is stable as neither of them cross the 5% boundary. The paper recommended that government should increase expenditure to the social and economic sectors while debts or debt servicing should be reduced. Also, corruption so prevalent in the public sector must be minimized if cannot be eradicated.
International Journal of Humanities and Social Science Invention (IJHSSI)inventionjournals
International Journal of Humanities and Social Science Invention (IJHSSI) is an international journal intended for professionals and researchers in all fields of Humanities and Social Science. IJHSSI publishes research articles and reviews within the whole field Humanities and Social Science, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
I prepared this slide on my research paper 'fiscal deficit and inflation ' on the current economic situation of India. In this data has been collected from economic survey 2011-12 and several other books. This slide has full data how the the central govt. and central bank uses their, fiscal policy and monetary policy respectively Hope, it will provide a good help for students who want to know about these concepts of economics.
gaurav tripathi(undergrad econ)>
here is a ppt on 'fiscal deficit and inflation'. it basically deals , that how govt. and central govt. makes their fiscal and central policy. the problems and solutions are shown. just gotta follow them. <gaurav>
Government expenditure is a very instrumental demand tool in achieving economic stability and policy makers frequently use it to influence certain economic outcomes. Government expenditure majorly consists of two components: investment and consumption components. Many researchers concede that higher level of government consumption expenditure is growth retarding and therefore undesirable. The aim of this paper was to establish the economic determinants of government consumption expenditure in Kenya. The results showed that in the long-run, while 1USD increase in GDP causes USD1.3 increase in government consumption expenditure, a unit increase in inflation rate would cause USD1.8 increase in consumption expenditure. However, 1USD increase in foreign direct investment and external debt stock causes, respectively, USD 0.07 and USD 2.6 drop in government consumption expenditure. Corruption, democracy and political instability have positive effects on government consumption expenditure in Kenya. Urbanization and population dynamics jointly affect the variable in the short-run. This paper recommends that the government should strengthen its institutions that are mandated to deal with graft cases, create peaceful political setting at all times and ensure a friendly environment to foreign investors.
American Journal of Multidisciplinary Research and Development is indexed, refereed and peer-reviewed journal, which is designed to publish research articles.
Analysis Effect of Household Consumption, Private Investment and Regional Exp...AJHSSR Journal
ABSTRACT : This study aims to analyze the effect of household consumption, private investment and
regional expenditures on employment opportunities and regencies/city economic growth in the Province of Bali.
The research data uses panel data, which is a combination of 9 regencies/cities and 10 years of observations so
that 90 observations are obtained. Data sourced from BPS Bali Province and analyzed using path regression
analysis techniques. The results of the analysis found that there was a significant positive influence between
household consumption, private investment, and regional expenditures on employment opportunities. There is a
significant positive influence between the variables of household consumption, private investment, regional
expenditures and employment opportunities on economic growth. Employment opportunities are able to mediate
the influence of household consumption, private investment, and regional expenditures on the economic growth
of regencies/cities in Bali Province.
KEYWORDS : Household consumption, private investment, regional expenditures, employment opportunities,
economic growth.
Analysis of Public Investment Expenditure on Economic Growth in WAEMU Countriesinventionjournals
Public investment expenditure plays an important role in the economy to produce goods and services needed for economic development. This study analyzes the influence of public investment spending on the economic growth of the WAEMU zone. The study considers a linear approach through individual fixed effects models with Beck-Katz and Driscoll-Kraay corrections, the spatial autocorrelation model (SAC) and the longterm model (DOLS). The empirical results of the study using panel data covering the period 1990-2015 indicate that public investment spending can promote economic growth in WAEMU countries when they are allocated in decreasing order to Education, health, public investment in basic road infrastructure and agriculture. However, they are also likely to slow it down when they focus on military spending, even though their primary objective is to ensure security for economic development. Finally, the study recommends that policy makers in WAEMU countries refocus their public expenditure policies in key sectors of development, notably human capital, in order to ensure a multiplier effect of public spending on economic growth and strengthen institutions Democracy to ensure their independence through their interdependence.
Similar to Impact ofExpanding Economic Activities onGovernment Expenditure inNigeria (20)
An Examination of Effectuation Dimension as Financing Practice of Small and M...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Does Goods and Services Tax (GST) Leads to Indian Economic Development?iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Childhood Factors that influence success in later lifeiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Emotional Intelligence and Work Performance Relationship: A Study on Sales Pe...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Customer’s Acceptance of Internet Banking in Dubaiiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
A Study of Employee Satisfaction relating to Job Security & Working Hours amo...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Consumer Perspectives on Brand Preference: A Choice Based Model Approachiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Student`S Approach towards Social Network Sitesiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Broadcast Management in Nigeria: The systems approach as an imperativeiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
A Study on Retailer’s Perception on Soya Products with Special Reference to T...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
A Study Factors Influence on Organisation Citizenship Behaviour in Corporate ...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Consumers’ Behaviour on Sony Xperia: A Case Study on Bangladeshiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Design of a Balanced Scorecard on Nonprofit Organizations (Study on Yayasan P...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Public Sector Reforms and Outsourcing Services in Nigeria: An Empirical Evalu...iosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Media Innovations and its Impact on Brand awareness & Considerationiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Customer experience in supermarkets and hypermarkets – A comparative studyiosrjce
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1. IOSR Journal of Economics and Finance (IOSR-JEF)
e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 6, Issue 5. Ver. I (Sep. - Oct. 2015), PP 01-09
www.iosrjournals.org
DOI: 10.9790/5933-06510109 www.iosrjournals.org 1 | Page
Impact ofExpanding Economic Activities onGovernment
Expenditure inNigeria
Osmond N. Okonkwo1
Nnamocha P.N.2
Emmanuel I.Ajudua3
1
Department of Economics, Alvan Ikoku Federal College of Education, Owerri. Nigeria.
2,3
Department of Economics, Faculty of Social Sciences, Imo State University, Owerri. Nigeria
Abstract: The main focus of this study is to investigate the impact of expansion in economic growth on
government expenditure in Nigeria covering the periods 1970 to 2012. Gross Domestic Product (GDP) was
used as a proxy for economic growth, and the GDP time series was decomposed using the partial sum approach
in order to achieve asymmetry in the variable. The asymmetric ARDL estimation technique was appropriately
employed in this study. The findings of this study revealed that expansion in economic growth has significant
impact on government expenditure in Nigeria. The study further provided evidence of long-run causality from
boom/expansion in economic growth to government expenditure in Nigeria but could not support any evidence
of short-run causality. The researcher recommended among others, that Governments in Nigeria should give
more impetus to policies that will guarantee sustainable economic growth.
Keywords:Economic growth, Government expenditure, Asymmetric ARDL, Long-run Causality, and Short-run
Causality.
I. Introduction
Government expenditure no doubt exerts enormous influence on economic growth, however, the
growing size of government activities resulting from expanding economic developments, functions and
responsibilities, especially in developing economics have far reaching implication on economic growth.
Stimulating economic growth through increasing government activities will increase revenue for the
government through taxes and will further stimulate government expenditure. This scenario of increasing
government activities appear to have impactful effects on economic activities in these economics. This thinking
seems to be driving the spending-revenue hypothesis that dominates public finance literatures. The spending-
revenue hypothesis states that changes in government expenditure drives changes in government revenue, thus,
suggesting that causality runs from government spending to government revenue.
However, it is insightful to note that changes in economic activities drives changes in government
revenue which in turn drives changes in government expenditure, hence it is called revenue-spending
hypothesis. Growth in economic activities imply growth in the employment of productive resources in the
economy, this brings about increasing output, indicative of increase in income, which leads to corresponding
increase in government revenue resulting from taxes, the increase in revenue further stimulates government
spending. Based on this background, the postulates of this hypothesis argued that increase in government
revenues through taxes drive increases in government spending (Friedman 1978, Buchanan & Wagner 1978,
Barro 1990, Eita and Mbazima 2008, Sobhee 2004, Buchanan 1960).
It is also arguable that increasing government expenditure aimed at meeting the increasing need for
social overheads, in turn, increases productive capacity. For instance, government spending on health,
education, roads, railways, aviation, power, communication, increase productivity and enhances income.
Increase in income on the other hand, stimulates savings and in turn stimulates investment and capital
formation. It is this apparent increase in economic activities resulting from increasing income that provides the
basis for increase in government revenues.
Although, Wagner established in his law of increasing public expenditure as cited by Musgrave
(1989:P114) that the increase in government expenditure is both extensive and intensive, that the government
undertakes new functions in the interest of the economy, the purpose of the government activities is to meet the
economic needs of the people, and the expansion and intensification of government functions and activities lead
to increase in government expenditure. Peacock and Wiseman (1979) collaborated Wagner’s law. They
basically further concluded that “the rise in public expenditure greatly depends on revenue collection, over the
years, economic development results in substantial revenue to the governments, this enables increase public
expenditure”.
Since rise in public expenditure greatly depends on revenue collection, and revenue collection depends
on the level of economic activities it therefore follows that government expenditure depends on the level of
economic activities. While economic growth is mostly treated as symmetric this study intend to decompose this
2. Impact of Expanding Economic Activities on Government Expenditure in Nigeria: An Asymmetric …
DOI: 10.9790/5933-06510109 www.iosrjournals.org 2 | Page
variable into boom/expansion in economic growth and depression in economic activities and then examines the
relationship between expansion in economic activities and government expenditure in Nigeria.
The Nigerian economy had actually witnessed massive expansion with great intensity over the year,
the annual National budget had metamorphosed from billions of Naira to trillions of Naira, even though the
effects of these budgets remain largely unnoticed and a mirage, the impact on the standard of living of the
citizenry remain insignificantly different from zero. The gross domestic product (GDP) had risen for 19,422.0
Naira in 1970 to 40,5844,099.94 naira in 2012, while total government expenditure had risen from 1130.1 naira
in 1970 to 4,605,319,72 naira in 2012, over the years , empirical studies are in agreement that positive
relationship exist between government expenditure and economic growth, but have mixed findings on the
existence of causality and also on the direction of causality running from government expenditure to economic
growth and or from economic growth to government expenditure. Previous studies have treated economic
growth in relation to government expenditures as symmetric, while in fact growth rate per annual is very much
asymmetry having low times and high times (depression and boom periods) within a year, indicative of bad
news and good news. How then does government expenditure adjust to changes in boom or depression in
economic activities in Nigeria?
The major objective of this study is to estimate the impact of economic growth rate on government
expenditure using asymmetric ARDL approach. While the specific objectives of this study include:
To estimate the impact of expanding economic growth on government expenditure
To determine the existence and nature of causality running between expanding economic activities and
government expenditure.
II. Conceptual Framework
2.1 Government Expenditure: This is the acquisition by governments of goods and services for current
consumption to directly satisfy the individual or collective needs of the society, referred to as government
consumption expenditure, while government acquisition of goods and service intended to create future
benefits in referred to as government investment expenditure (government gross capital formation). All
governments’ acquisitions (government consumption expenditure plus government investment expenditure)
are classified total government expenditure.
Government expenditure can be financed by borrowing, printing of new money, taxes or revenues from
government direct investments. However, in developing economics like Nigeria, the bulk of government
revenues come from proceeds of governments direct investments even though some the government investments
are supposed to be subsidized. This presupposes that while it is not in doubt that governments spending
stimulates economic growth, economic growth on the other hand stimulates government spending as changes in
economic growth rate determines change in revenues accruable to the government upon which spending in
based.
2.2 Government Expenditure and Production: Government expenditure on socially desirable goods or
services increases productive capacity. Government expenditure on education, health, good housing,
communication and transportation services increases productivity and therefore, income. Rising income
also means rising sowings and subsequently stimulates investment and gross capital formation.
Also governments’ expenditure through tax cuts and subsidies is an effective instrument to stimulate
investment on a particular industry, thus stimulating overall growth in productivity in the economy.
2.3 Government Expenditure and Consumption: Government spending enhances redistribution of income
in favour of low income earners in the economy. It improves the capacity of low income earners to
consume. Government spending stimulates economic activities and therefore stimulates consumption in the
economy.
2.4 Government Spending and Macroeconomic Stability: Macroeconomic instability takes the form of
depression, recession and inflation. Government expenditure is used as a tool to control instability in an
economy. Government spending has proved effective over years for stimulating effective demand and
subsequently getting out of depression. Government spending is also amenable to controlling inflation and
deflation, by reducing government spending during inflation and increasing government spending during
deflation, thus bringing about price stability in the economy.
2.5 Economic growth and Government Expenditure: No doubt, the bulk of government revenues come
from proceeds from government direct, investments in Nigeria, while printing of new money and taxes have
3. Impact of Expanding Economic Activities on Government Expenditure in Nigeria: An Asymmetric …
DOI: 10.9790/5933-06510109 www.iosrjournals.org 3 | Page
remain major components of government revenues in Nigeria, revenues from governments direct
investments have dominated governments revenue streams in Nigeria. This phenomenon explains
fluctuations in government expenditure over the years in Nigeria. The periods of oil booth for instance,
witnessed reckless spending by governments at all levels in Nigeria, while the period of world oil price glut
as it persists till date saw many states governments enable to pay salaries thus, economic growth stimulates
government spending.
2.6 Theoretical Framework
Wagner’s law of Increasing State Activity: Named after the German economist, Adolph Wagner based on his
studies; first on German economy and then other countries, analyzing trends in the growth of public sector come
to the conclusion that for any country the public expenditure rises constantly. Hence Wagner’s law states that
“as the economy develops over time, the activities of functions of the government increase”. According to
Adolph Wagner cite in strategistng.blogspot.com (2013) “comprehensive comparisons of different countries and
different times show that among progressive peoples (societies), with which alone we are concerned; an increase
regularly takes place in the activity of bot the central government and local governments constantly undertake
new functions, while they perform both old and new function more efficiently and more completely. In this way
economic needs of the people to an increasing extent and in a more satisfactory fashion are satisfied by the
central and local governments”. Thus, Wagner’ law can be summarized as follows: (a) in progressive societies,
the activities of governments increase on a regular basis. (b) Government activities increase extensively and in
intensity (c) The government undertake new functions in the interest of the society, performing both old and
new functions more efficiently and comprehensively than before, (d) the expansion and intensity of government
function leads to increase in public expenditure.
Peacock –Wiseman Hypothesis
Peacock and Wiseman conducted a study based on Wagner’s law and found out that Wagner’s law is
still valid. In furtherance to that they concluded that (1) the rise in public expenditure collection over the years,
economic development results in substantial revenue to the governments, this enable to increase public
expenditure”. (ii) There exists a big gap between the expectations of the people about public expenditure and the
tolerance level of taxation. Therefore, governments cannot ignore the demands, made by people regarding
various services, especially, when the revenue collection in increasing at constant rate of taxation. (iii) They also
stated that further increases the tax rates, and enlarges the tax structure to generate more funds to meet the
increase in defence expenditure. After the war, the new tax rates and tax structures may remain the same, as
people get used to them. Therefore, increase in revenue results in rise in government expenditure.
Musgrave’s Development Hypothesis
Musgrave (1969) suggested that the growth of public expenditure is related to the pattern of economic
growth and development societies. Thus, three stages in the development process could identified (i) The early
development stage where considerable expenditure is needed on education and infrastructure, and where private
saving is unable to finance this necessary expenditure due to paucity of funds, public expenditure must therefore
constitute higher proportion of gross capital formation and subsequently total output; (ii) The phase of rapid
growth in which there are large increases in private savings and public investment falls proportionality; and (c)
high income societies with increased demand for private goods which need complementary public investment.
Thus as the society more into high income stage, there is increasing need for skilled labour which therefore
leads to increasing public investment in education. In the same vein, rural-urban migration leads to urban slums.
These factors leads to another round of increase in public expenditure in relation to gross national product
(GNP); hence Musgrave study of the growth or government expenditure in the united states; 1890 to 1987
revealed that ratio of public expenditures to GNP rose from 6 to 35 percent over nearly ninety year period.
2.3Empirical Framework
Dada and Adesina (2013) in their study “Empirical Investigation of the Validation of Peacock –
Wiseman Hypothesis: Implication for Fiscal Discipline in Nigeria” employed vector error correction model and
standard Granger causality test to determine the direction of causality between government expenditure and
revenue in Nigeria. They came to the conclusion that unidirectional causality exists between government
expenditure and revenue in Nigeria, with the causality runs from government expenditure to revenue.
Investigating the impact of government expenditure on economic growth in Nigeria, Abu and Abdullah (2010)
employed disaggregated data on government expenditure to investigate the relationship between government
expenditure and economic growth from the period 1970 to 2008. This study came to the conclusion that total
government expenditure and expenditure on Education impact negatively on economic growth in Nigeria, while
4. Impact of Expanding Economic Activities on Government Expenditure in Nigeria: An Asymmetric …
DOI: 10.9790/5933-06510109 www.iosrjournals.org 4 | Page
on the contrary, government expenditure on transport, communication and health stimulate economic growth in
Nigeria.
World Bank’s Development Report (1994) reveals that developing countries invest about $200billion
per year in new infrastructure, representing 4 percent of their national output. This has resulted to radical
increase in infrastructure expenditure for transport, power, water, sanitation, telecommunications, and irrigation.
The expenditure on infrastructure to meet the growing demands of business, households, and other users is a
major challenge in developing countries including Nigeria.
Olorunfemi, (2008) investigated the relationship between public investment and economic growth in
Nigeria, using disaggregated data series spanning from 1975 to 2004. Study revealed that Government
expenditure impacted positively on economic growth. The study revealed that of the total government
expenditure, 62.9% was on current expenditure while 37.1% of total government expenditure was devoted to
capital expenditure.
Ram (1988) studied the impact of government expenditure on economic growth using the production
function, modelled for both public and private sectors. Using data for 115 countries, the result of study revealed
that government expenditure have significant positive impact on economic growth, particular in the developing
countries under study.
Mitchell (2005) investigated the impact of government spending on economic growth in developed
countries. He assessed the international evidence, reviewed the latest academic research, cited examples of
countries that have significantly reduced government spending as a share of national output and analyzed the
economic consequences of these reforms. Regardless of the methodology or model employed, he concluded that
a large and growing government is not conducive to better economic performance. He further argued that
reducing the size of government would lead to higher incomes and improve American’s competitiveness.
Junko and Vitali (2008) investigate the impact of government expenditure on economic growth in
Azerbaijan because of the temporarily oil production boom (2005) which caused exceptionally large expenditure
increase aimed at improving infrastructure and raising incomes. Azerbaijan’s total expenditure increased by a
cumulative 160 percent in nominal value from 2005 to 2007 (i.e. from 41 percent of non-oil GDP to 74 percent)
in their research reference which were made to Nigeria and Saudi Arabia (1970-89) who have also experienced
oil boom and increased government expenditure over the years. The study simulated the neo-classical growth
model tailored to the Azeri conditions. Their analysis suggested that the evaluated fiscal scenario poses
significant risks to growth sustainability and historical experience indicates that the initial growth performance
largely depends on the efficiency of scale-up expenditure. The study also sheds light on the risks associated with
a sudden scaling-down of expenditure, including the political difficulties to undertake an orderly expenditure
reduction strategy without undermining economic growth and the crowding out effects of large government
domestic borrowing.
III. Nature and Sources of Data
3.1This study employed secondary data collected from the following sources; Central bank of Nigeria’s
statistical bulletin (various issues including 1999, 2006 and 2012 editions); National bureau of statistics’
statistical fact sheets; CBN’s annual reports (various editions); www.economywatch.com; www.knoema.com;
and indexmundi.com. The data series sourced therefrom and used in this study include: Federal Government
Total Expenditure (FTE) and Real Gross Domestic Product (RGDP). In order to situate this study appropriately
under the purview of asymmetric analysis, the real gross domestic product (as the explanatory variable) was
discomposed into expansion in growth (RGDP_P) and contraction in growth (RGDP_M) indicative of
asymmetry in the growth rate in economic activities.
3.2 Data Analysis Technique
3.2.1 Model Specification
The empirical model of this study is derived from the theoretical framework specifically of the
Wagner’s law. Theoretically, the feedback from economic growth to government spending is made explicit in
the relationship between increases in economic growth leading to increase in government revenues (through
corresponding increase in tax revenues). However, in order to analyze the differential impact of expanding
(boom) and contracting economic activities on government expenditure as set out in this study, the point of
departure is to transform the variable of interest into positive and negative partial sum. The decomposition of
the variable is the most important step. Thus, adopting the asymmetric ARDL (Greenwood-Nimmo and Shin,
2013), this attempts to model the differential impact of expanding and contracting economic activities on
government expenditure. The asymmetric ARDL of Greenwood-Nimmo and Shin (2013) is specified as:
p q q
∆yt = α + λ1yt-1 + λ2
+
xt-1
+
+ λ2
-
xt-1
-
+ ∑θj∆yt-1 + ∑ßj
+
∆x+
t-1 + ∑ß-
j∆x+
t-1 + Ɛt
i=1 i=0 i=0
5. Impact of Expanding Economic Activities on Government Expenditure in Nigeria: An Asymmetric …
DOI: 10.9790/5933-06510109 www.iosrjournals.org 5 | Page
The baseline model to be estimated for this study is first specified in the following functional form as shown
below.
FTE = f(RGDP_P, RGDP_M) ... (1)
Where: FTE is Federal Government Total Expenditure
RGDP_P is expansion in economic growth
RGDP_M is contraction in economic growth
Equation (1) was rewritten in its explicit form as;
FTE = 0 + 1RGDP_P + 2RGDP_M + Ɛt ... (2)
To establish the existence of long run relationship (that is, cointegration) among the variables of the study, the
joint (wald) test of the long run coefficients was estimated in order to derive the vital F-statistic needed to
conduct the bound test (to establish long run relationship among the variables). The applicable hypothesis is the
null hypothesis of no long-run relationship, such as:
H0: λ1 = λ2 = λ3 = λ4 = 0 (no long-run relationship)
H1: λ1 ≠ λ2 ≠ λ3 ≠ λ4 ≠ 0 (there exist long-run relationship)
If there is a long-run relationship, between the variables, that is, the estimated variables are cointegrated, and the
estimated relationship not spurious, then estimated coefficient of the long-run relationship is analyzed and the
error correction model may then be estimated. Equation (2) is further expressed in the generalized
autoregressive distributed lag (ARDL) model of the form ARDL(p; q1; q2; …qk). Such that:
k
ß(L,p)yt = ∑ß1(Liqi)xit+ ßwt +Ɛt … (3)
i=1
Where
ß (L,p) = 1 - ß1L - ß2L2
- … - ßpLP
ßi(L,q) = 1 + ßi1L + ßi2L2
+ ….+ ßiqLqi
, for i = 1, 2, …, k … (4)
Since there is evidence of a long-run relationship among the variables included in Equation (2), the following
long-run model will be estimated
p p p
FTE t = + ∑1iFTEt-1 + ∑2iRGDP_Pt-1 + ∑3iRGDP_Mt-1 + Ɛt ... (5)
i=1 i=0 i=0
The asymmetric ARDL model of Greenwood-Nimmo and Shin (2013) is then specified thus:
P q q
∆ FTE t = α + λ1 FTE t-1 + λ2
+
RGDP_Pt-1
+
+ λ2
-
xt-1
-
+ ∑θj∆ FTE t-1 + ∑ßj
+
∆RGDP_P+
t-1 + ∑ß-
j∆RGDP_P+
t-1 + Ɛt
i=1 i=0 i=0
1> 0, 2> 0, 3, < 0.
Where: is the differenced operator.
3.2.2 Model Estimation Technique
The method of estimation used in this study is the Asymmetric Autoregressive Distributed Lag
(ARDL) technique. While the operational software used in this study is the E-views, version 7.1. The question
of asymmetry in economics is common place and of importance. Good and bad news are everywhere. Here, we
want to understand the differential impacts of boom and contracting economic activities on government
expenditure. The distinction is important if we want to appropriately respond to and formulate policies to
address changes in economic activities. If linearity is assumed in the relationship between income and
government spending as in the literature on traditional Wagner’s law, symmetric policy response will be
expected to be inadequate or to impair the relationship if indeed the assumed linear relationship is appropriate
(Olayeni, 2015).
IV. Data Analysis And Discussion Of Findings
4.1 In order to validate the ARDL technique as a suitable method of data analysis in this study, it became
imperative to conduct the stationarity test to ensure that there is no I(2) variable, the ADF statistics in table 4.2
in appendix revealed that all variables are I(0) and I(1) variables. The model was further tested for stability
using the cumulative sum of recursive residuals (CUSUM) as shown in figure 4.1 in appendix and the model
was found to be stable at 5% significance level. To establish the existence of long run relationship between GDP
and government expenditure, the joint (Wald) test of the long run coefficients was estimated in order to derive
the F- statistic needed to conduct bound test (to establish long run relationship among the variables). The F-
6. Impact of Expanding Economic Activities on Government Expenditure in Nigeria: An Asymmetric …
DOI: 10.9790/5933-06510109 www.iosrjournals.org 6 | Page
statistic of the joint test of the long run coefficients as in table 4.3 is 15.687 while the upper bound of the
Pesaran critical value bounds at 5% is 5.73. Since the value of our F-statistic exceeds the upper bound at 5%
levels of significance, we conclude that long run relationship exist between FTE and GDP_P. The long run
relationship is further confirmed by the Pesaran bound test for t-statistics, the t-statistics of FTE(-1) is -5.33,
while the upper bound of the Pesaran t-statistic table at 5% significant level is -3.50. This result reinforces the
conclusion that there is a long run relationship between expanding economic growth (GDP_P) and government
expenditure (FTE) in Nigeria. We can also see that the long run multiplier between GDP_P and FTE is
0.31186/-2.162502 = 0.16, that is, in the long run, a one unit increase in GDP will lead to an increase of 0.16
units in government expenditure.
Table 4.1: OLS Result
Dependent Variable: DFTE
Method: Least Squares
Sample (adjusted): 1974 2012
Included observations: 39 after adjustments
Variable Coefficient Std. Error t-Statistic Prob.
C 24505.86 16898.57 1.450173 0.1574
FTE(-1) -2.162502 0.405410 -5.334104 0.0000
GDP_P(-1) 0.351186 0.063157 5.560502 0.0000
DFTE(-1) 0.327646 0.303161 1.080767 0.2884
DFTE(-2) -0.058280 0.171629 -0.339567 0.7365
DGDP_P 0.056865 0.013896 4.092318 0.0003
DGDP_P(-1) -0.281208 0.057999 -4.848471 0.0000
DGDP_P(-2) -0.257547 0.054282 -4.744610 0.0000
DGDP_P(-3) -0.039716 0.049225 -0.806828 0.4261
R-squared 0.890746 Mean dependent var 118045.9
Adjusted R-squared 0.861612 S.D. dependent var 222651.6
S.E. of regression 82827.69 Akaike info criterion 25.68609
Sum squared resid 2.06E+11 Schwarz criterion 26.06999
Log likelihood -491.8787 Hannan-Quinn criter. 25.82383
F-statistic 30.57369 Durbin-Watson stat 1.990271
Prob(F-statistic) 0.000000
The residuals series were constructed and the restricted ECM was fitted. The ECM in table 4.5 revealed
that expansion in economic growth (GDP_P) at current value, lag one (-1) and lag two(-2) significantly impact
on government expenditure in Nigeria at one percent level of significance, while immediate past government
expenditure DFTE(-1) impacts on current government expenditure at 10% level of significance.
Table 4.5: Error Correction Model
Dependent Variable: DFTE
Method: Least Squares
Sample (adjusted): 1974 2012
Included observations: 39 after adjustments
DFTE = C(1)+C(2)*DGDP_P+C(3)*DGDP_P(-3)+C(4)*DFTE(-
1)+C(5)
*DGDP_P(-2)+C(6)*DGDP_P(-1)+C(7)*ECM(-1)
Coefficient Std. Error t-Statistic Prob.
C -4.85E-10 15826.76 -3.06E-14 1.0000
DGDP_P 0.057784 0.010109 5.716121 0.0000
DGDP_P(-3) -0.046595 0.040900 -1.139250 0.2631
DFTE(-1) 0.400122 0.207923 1.924380 0.0632
DGDP_P(-2) -0.262799 0.043772 -6.003856 0.0000
DGDP_P(-1) -0.285560 0.049476 -5.771647 0.0000
ECM(-1) -0.227552 0.345696 -0.658243 0.0000
R-squared 0.890326 Mean dependent var 118045.9
Adjusted R-
squared
0.869762 S.D. dependent var 222651.6
7. Impact of Expanding Economic Activities on Government Expenditure in Nigeria: An Asymmetric …
DOI: 10.9790/5933-06510109 www.iosrjournals.org 7 | Page
S.E. of regression 80351.54 Akaike info criterion 25.58736
Sum squared
resid
2.07E+11 Schwarz criterion 25.88595
Log likelihood -491.9535 Hannan-Quinn criter. 25.69449
F-statistic 43.29568 Durbin-Watson stat 2.016626
Prob(F-statistic) 0.000000
The coefficient of the error correction term, ECM, is rightly signed (that is, negative) and very
significance at 1%. The magnitude of this coefficient implies that 23% of any disequilibrium between
government expenditure and expansion in economic growth is corrected for within one year.
Table 4.6: TEST FOR SERIAL CORRELATION
Breusch-Godfrey Serial Correlation LM Test:
F-statistic 2.478859 Prob. F(2,30) 0.1008
Obs*R-squared 5.530997 Prob. Chi-Square(2) 0.0629
The error correction model was tested for serial correlation as shown in the table 4.6 above, which
revealed that the model is serially independent. Also to ensure that the model is dynamically stable, the
cumulative sum of recursive residuals (CUSUM) test was conducted and the result revealed that the model is
dynamically stable as shown in figure 4.2 below.
Figure 4.2: Stability Test of the Error Correction Model
Although there exist an evidence of long run causality from expanding economic growth (GDP_P) to
government expenditure (FTE) in Nigeria as seen in the error correction term (ecm(-1)) of the short run
dynamics, there is however no evidence of short run causality running from expanding economic growth to
government expenditure, neither were there strong causality running between expanding economic growth and
government expenditure in Nigeria as could be seen in tables 4.7 and 4.8 respectively in appendix.
V. Summary of Major Findings
The econometric investigation of this study offers evidence that there is indeed a significance
relationship between expansion in economic growth and government expenditure in Nigeria. Investigation of
this study revealed that both the long run and short run dynamic models provided evidence that expansion in
economic growth impact significantly on government expenditure, considering the fact that these models were
stable and serially independent. Also of important note, is that this study revealed that there existlong run
causality from expansion in economic growth to government expenditure, while providing no evidence of short
run causality from expansion in economic growth to government expenditure in Nigeria.
VI. Conclusion
The impact of expanding economic growth on government expenditure has been extensively
investigated in this study. The application of asymmetric autoregressive distributed lag (ARDL) estimator to a
set of dynamic time series data models in investigating the research problem have proved quite intuitive, robust
and unequivocally suitable. This study focused mainly on the positive asymmetry in economic growth and its
impact on government expenditure. Time series data covering the periods 1970 to 2012 were used for this study.
The statistical properties of the data were properly investigated using appropriate econometric techniques. The
-20
-15
-10
-5
0
5
10
15
20
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
CUSUM 5% Significance
8. Impact of Expanding Economic Activities on Government Expenditure in Nigeria: An Asymmetric …
DOI: 10.9790/5933-06510109 www.iosrjournals.org 8 | Page
findings of this study provided strong evidence that boom in economic activities significantly impact on
government expenditure positively in Nigeria.
VII. Recommendations
The researcher recommends:
That policy decisions on improving economic activities in the economy should be of priority. Impetus must
then be given to manufacturing in particular and industrialization in general without leaving out agriculture
in order to foster sustainable economic growth which will translate into increase in revenue for the
government for which the government will finance her expenditure and possible reduced government
deficit that had become the tradition over the years in Nigeria.
Governments in Nigeria should give more impetus to policies that will guarantee sustainable economic
growth.
Finally, there is need to reverse governments priority on spending decision. Empirical evidence shows that
government spending decision occurs prior to the decision to raise revenue in Nigeria (Dada and Adesina,
2013), this is responsible for the rising fiscal deficits in Nigeria, and hence a reversal will mean sustaining
economic growth in order to generate more revenue through taxes to meet governments’ fiscal obligations.
References
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Appendix
Table 4.2: Stationarity Test
Unit Root Tests
Sample: 1970 2012
Test Type: ADF
Level First Second
FTE 1.884632 3.898872 -0.932582
GDP_P 5.857435 6.817074 1.644623
GDP_M 0.000000 -6.324555 -7.449832
1% level -2.621185 -2.622585 -2.625606
5% level -1.948886 -1.949097 -1.949609
10% level -1.611932 -1.611824 -1.611593
9. Impact of Expanding Economic Activities on Government Expenditure in Nigeria: An Asymmetric …
DOI: 10.9790/5933-06510109 www.iosrjournals.org 9 | Page
Table 4.3: Wald Test
Wald Test:
Equation: Untitled
Test Statistic Value df Probability
F-statistic 15.68658 (2, 30) 0.0000
Chi-square 31.37315 2 0.0000
Figure 4.1: Stability Test of the OLS Model
Table 4.7: Short Run Causality Test
.Wald Test:
Equation: Untitled
Test Statistic Value df Probability
F-statistic 34.00695 (4, 32) 0.0000
Chi-square 136.0278 4 0.0000
Table 4.8: Strong Causality Test
Wald Test:
Equation: Untitled
Test Statistic Value df Probability
F-statistic 46.25556 (5, 32) 0.0000
Chi-square 231.2778 5 0.0000
-16
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-8
-4
0
4
8
12
16
84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
CUSUM 5% Significance