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
This document discusses the relationship between economic growth and public expenditure in India based on Wagner's Law. It introduces the six versions of Wagner's Law proposed by different economists from 1961 to 1980. The document then reviews several previous studies that have examined the validity of Wagner's Law in India and other countries. The focus of the current study is described as examining the relationship between public expenditure and economic growth in India using the six versions of Wagner's Law. The study uses annual time series data from 1970-71 to 2011-12 and tools like unit root tests, cointegration analysis, vector error correction models, and Granger causality tests to analyze the data and test the hypotheses.
This document summarizes a study examining the relationship between government expenditure and economic growth in Saudi Arabia from 1970-2017. It discusses Wagner's Law, which posits that economic growth leads to increased government spending, and the Keynesian approach, which argues the reverse causal relationship. The study aims to test the validity of five versions of Wagner's Law and the Keynesian approach in the Saudi context using time series analysis. Previous literature on this topic for Saudi Arabia and other countries is reviewed. The methodology and empirical results of testing the relationship between government expenditure and economic growth using cointegration and Granger causality tests are then discussed.
This document summarizes Wagner's hypothesis and the Peacock-Wiseman hypothesis about public expenditure. Wagner hypothesized that industrialization leads to increasing state activity and that public expenditure will rise faster than per capita income. The Peacock-Wiseman hypothesis emphasizes time patterns of spending rather than a theory of growth. It involves displacement effects as social disturbances expand the public sector, inspection effects as revenue lags required spending, and concentration effects as central government activity increases with economic growth. The document also lists criticisms of Wagner's hypothesis and defines intensive and extensive increases in state activity.
An empirical analysis of the structure and growth of federal government expen...Alexander Decker
This document summarizes a study that examined the structure and growth of federal government expenditure in Nigeria from 1970 to 2009. The study used time series data and ordinary least squares regression analysis. The results revealed that several factors contributed to the growth of government expenditure in Nigeria over this period, including fiscal deficit, gross domestic product, government revenue, and debt servicing. The study recommends that the government maintain fiscal discipline, prevent high inflation, and ensure productive use of revenue to help reduce growth in government spending.
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.
Empirical investigation of government expenditure and revenue nexus; implicat...Alexander Decker
This document summarizes a study that examined the relationship between government expenditure and revenue in Nigeria from 1961 to 2010. It employed various econometric techniques, including unit root tests, cointegration tests, error correction models, and Granger causality tests. The results showed that government expenditure and revenue were not cointegrated and there was no long-run relationship between the two variables. The error correction models provided evidence of a divergence rather than convergence relationship. The Granger causality tests found no causality between expenditure and revenue. Overall, the findings supported the hypothesis of institutional separation, meaning the government's decisions around spending and revenue raising were independent of each other.
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.
This document discusses the relationship between economic growth and public expenditure in India based on Wagner's Law. It introduces the six versions of Wagner's Law proposed by different economists from 1961 to 1980. The document then reviews several previous studies that have examined the validity of Wagner's Law in India and other countries. The focus of the current study is described as examining the relationship between public expenditure and economic growth in India using the six versions of Wagner's Law. The study uses annual time series data from 1970-71 to 2011-12 and tools like unit root tests, cointegration analysis, vector error correction models, and Granger causality tests to analyze the data and test the hypotheses.
This document summarizes a study examining the relationship between government expenditure and economic growth in Saudi Arabia from 1970-2017. It discusses Wagner's Law, which posits that economic growth leads to increased government spending, and the Keynesian approach, which argues the reverse causal relationship. The study aims to test the validity of five versions of Wagner's Law and the Keynesian approach in the Saudi context using time series analysis. Previous literature on this topic for Saudi Arabia and other countries is reviewed. The methodology and empirical results of testing the relationship between government expenditure and economic growth using cointegration and Granger causality tests are then discussed.
This document summarizes Wagner's hypothesis and the Peacock-Wiseman hypothesis about public expenditure. Wagner hypothesized that industrialization leads to increasing state activity and that public expenditure will rise faster than per capita income. The Peacock-Wiseman hypothesis emphasizes time patterns of spending rather than a theory of growth. It involves displacement effects as social disturbances expand the public sector, inspection effects as revenue lags required spending, and concentration effects as central government activity increases with economic growth. The document also lists criticisms of Wagner's hypothesis and defines intensive and extensive increases in state activity.
An empirical analysis of the structure and growth of federal government expen...Alexander Decker
This document summarizes a study that examined the structure and growth of federal government expenditure in Nigeria from 1970 to 2009. The study used time series data and ordinary least squares regression analysis. The results revealed that several factors contributed to the growth of government expenditure in Nigeria over this period, including fiscal deficit, gross domestic product, government revenue, and debt servicing. The study recommends that the government maintain fiscal discipline, prevent high inflation, and ensure productive use of revenue to help reduce growth in government spending.
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.
Empirical investigation of government expenditure and revenue nexus; implicat...Alexander Decker
This document summarizes a study that examined the relationship between government expenditure and revenue in Nigeria from 1961 to 2010. It employed various econometric techniques, including unit root tests, cointegration tests, error correction models, and Granger causality tests. The results showed that government expenditure and revenue were not cointegrated and there was no long-run relationship between the two variables. The error correction models provided evidence of a divergence rather than convergence relationship. The Granger causality tests found no causality between expenditure and revenue. Overall, the findings supported the hypothesis of institutional separation, meaning the government's decisions around spending and revenue raising were independent of each other.
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.
The Peacock-Wiseman Hypothesis proposes that government spending evolves in a step-like pattern coinciding with social upheavals like wars. It involves three related elements: 1) The displacement effect, where spending increases during disturbances, raising taxes and the budget. 2) The inspection effect, where increased spending leads to reviewing revenue needs. 3) The concentration effect, where spending and revenue stabilize at a new higher level until the next disturbance causes another displacement effect. Along with these effects, it explains the concept of a tolerance level of taxation that a population is willing to tolerate.
11.does the composition of public expenditure matter toAlexander Decker
The document examines the impact of public spending on various sectors on economic growth in Kenya from 1972 to 2008. It finds that:
1) Spending on education had a highly significant positive impact on economic growth, while spending on economic affairs and transport/communication also had a positive impact, though weaker.
2) Spending on agriculture had a significant negative impact on economic growth.
3) Spending on health and defense did not have a significant impact on economic growth.
The findings did not fully conform to the authors' prior expectations about the relationship between public spending and economic growth. The document reviews other literature that has found mixed results on this relationship.
Does the composition of public expenditure matter toAlexander Decker
The document examines the impact of public spending on various sectors on economic growth in Kenya from 1972 to 2008. It finds that:
1) Spending on education had a highly significant positive impact on economic growth, while spending on economic affairs and transport/communication also had a positive impact, though weaker.
2) Spending on agriculture had a significant negative impact on economic growth.
3) Spending on health and defense did not have a significant impact on economic growth.
The findings did not fully conform to the authors' prior expectations about the relationship between public spending and economic growth. The document reviews other literature that has found mixed results on this relationship.
Empirical investigation of the validation of peacock wiseman hypothesis- impl...Alexander Decker
This study examines the direction of causality between government expenditure and revenue in Nigeria from 1961 to 2010. It employs various econometric techniques, including cointegration analysis and Granger causality tests. The results show that government expenditure and revenue converge to a long-run equilibrium relationship. Additionally, there is unidirectional causality running from expenditure to revenue, supporting the Peacock-Wiseman hypothesis that government spending leads to increased revenue collection. This finding implies the hypothesis holds true in Nigeria in both the short-run and long-run, indicating that spending decisions typically precede revenue decisions.
Statistical Analysis of Interrelationship between Money Supply Exchange Rates...Atif Ahmed
Several researches have been conducted to study the impact of different macro-economic variables and their influence on government expenditure. By using different statistical tools researchers have examined that how money supply and exchange rate influence the government expenditure. Few other studies also conducted work on the quarterly time series data to examine the long run equilibrium association between the macroeconomic variables.
The impact of government agricultural expenditure on economic growth in zimbabweAlexander Decker
This document summarizes a study that investigated the impact of government agricultural expenditure on economic growth in Zimbabwe from 1980 to 2009. The study employed a log linear regression model with gross domestic product as the dependent variable and factors such as government expenditure on agriculture, investment, and consumption as explanatory variables. The regression analysis found that increased spending on agricultural research and development can improve economic growth. However, insufficient government expenditure on agricultural extension and credit assistance adversely affected economic growth in Zimbabwe. The results provide evidence that agriculture is an engine of economic growth in the country.
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.
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.
This document discusses the relationship between economic growth and unemployment rates. It finds that a persistently high unemployment rate remains a concern for Congress. While the unemployment rate has declined since peaking in 2009 and 2010, it remains elevated by historical standards. The key driver of unemployment over the long run is the rate of economic growth compared to potential growth. For unemployment to significantly decline, growth needs to outpace the combined growth of the labor force and productivity. Recent recoveries, including from the 2007-2009 recession, have seen slow declines in unemployment, described as "jobless recoveries."
This document discusses how governments can overcome inflation through monetary and fiscal policies. It explains that monetary policy uses interest rates and open market operations to control the money supply. Through open market operations, the central bank sells securities to lower bank reserves and restrict lending. Reserve requirements can also tighten the money supply by requiring banks to hold more reserves. Fiscal policy involves increasing taxes or reducing government spending to decrease spending in the economy. These contractionary policies aim to slow economic growth and reduce inflation.
This document provides an introduction to macroeconomics, including its key topics and goals. It discusses that macroeconomics studies aggregate economic measures of an economy, compared to microeconomics which focuses on individual agents. The main macroeconomic goals covered are low unemployment, price stability, and economic growth. These goals can sometimes complement each other, such as low unemployment and high growth, but can also conflict, such as low unemployment and low inflation. It also outlines some of the key principles of economics, including scarcity, rational self-interest, opportunity costs, and that decisions are made at the margin.
The document summarizes research from the Congressional Budget Office on inflation and the Phillips curve. It finds that while the aggregate Phillips curve is quite flat, estimating the relationship at the component level reveals differences between goods and services inflation. Services inflation remains procyclical, driven by domestic factors, while goods inflation has become less procyclical in recent decades due to globalization and other structural forces. The document also examines how measures of inflation expectations have evolved from being backward-looking to becoming more anchored, though consumers' expectations remain more responsive to shocks than professionals' forecasts.
This document summarizes a study that investigated the relationship between government expenditure and revenue in Nigeria and Ghana using Dynamic Ordinary Least Squares estimation. The study found:
1) There is bidirectional causation between government expenditure and revenue in both countries, supporting the fiscal synchronization hypothesis.
2) Changes in expenditure have a negative impact on revenue in Nigeria but positive impact in Ghana.
3) Changes in past expenditure values positively impact changes in revenue in Nigeria.
This document provides definitions and concepts related to macroeconomics and the macroeconomic environment of business. It defines macroeconomics as the study of the overall economy and discusses key macroeconomic objectives, indicators, and policies. It also explains concepts like GDP, GNP, inflation, money supply, and how they are measured. National income accounting and different economic systems are also summarized.
This document provides an introduction to macroeconomics, including its key topics and goals. It discusses that macroeconomics studies aggregate economic measures of an economy, unlike microeconomics which focuses on individual agents. The main macroeconomic goals covered are low unemployment, price stability, and economic growth. These goals can be complementary, like low unemployment and high growth, or conflicting, such as low unemployment and low inflation. The document also outlines several key principles of economics, including scarcity, rational self-interest, opportunity costs, and decisions made at the margin. It provides graphs about unemployment rates in the U.S. over time and examples of how these principles apply.
This document analyzes the relationship between inflation and economic growth in Qatar from 1980 to 2016. It finds that inflation and economic growth are cointegrated, indicating a long-run relationship. A Granger causality test shows causality runs from inflation to economic growth. The study uses time series analysis methods including unit root tests, Johansen cointegration, and Granger causality tests. Unit root tests show inflation and economic growth are non-stationary in levels but stationary in first differences. Johansen cointegration finds the variables are cointegrated, implying a long-run equilibrium relationship. The Granger causality test then finds causality runs from inflation to economic growth in the long-run.
This document discusses key economic indicators like inflation and unemployment. It defines inflation, lists common inflation measures like the CPI and PPI, and outlines drawbacks of the CPI. Unemployment is defined as those without a job but seeking work. Common types of unemployment include frictional, structural, and cyclical. Factors like minimum wages and recessions can impact unemployment levels.
What Is Inflation. Describe In Details.written By Rizwan Rizvi Rizwan Hussainy
This document discusses inflation in three paragraphs. It defines inflation as a rise in general prices over time which reduces purchasing power. Inflation is measured through indexes like the wholesale price index (WPI), consumer price index (CPI), and GDP deflator. The WPI tracks wholesale goods prices while the CPI tracks consumer goods and services prices. Demand-pull and cost-push inflation are also summarized, where demand-pull results from increased aggregate demand and cost-push from higher production costs reducing supply. The government uses monetary, fiscal, and price policies like controlling the money supply, taxes, and subsidies to check inflation.
The impact of the international price index on vietnam stock marketNghiên Cứu Định Lượng
- The document analyzes the impact of international price indices like gold, crude oil, and the S&P 500 market value (SP500) on Vietnam's stock market index (VNINDEX) from 2008 to 2013 using GJR-GARCH and ARDL models.
- The results show that SP500 has an immediate positive impact on VNINDEX, while lagged values of VNINDEX, crude oil prices, and SP500 also positively impact VNINDEX.
- The GJR-GARCH model found that positive and negative shocks to the market have similar effects on the variance of VNINDEX.
Demand for money in hungary an ardl approach by nikolaos dritsakisBalaji Bathmanaban
This study examines the demand for money in Hungary using quarterly data from 1995 to 2010 within an autoregressive distributed lag (ARDL) framework. The results of the bounds test confirm a stable, long-run relationship between M1 real monetary aggregate, real income, inflation rate, and nominal exchange rate. Specifically, real income has a positive impact on money demand while inflation and exchange rates have negative impacts. Stability tests also reveal a stable money demand function over the period examined, indicating M1 is a suitable intermediate target for monetary policy in Hungary.
The Peacock-Wiseman Hypothesis proposes that government spending evolves in a step-like pattern coinciding with social upheavals like wars. It involves three related elements: 1) The displacement effect, where spending increases during disturbances, raising taxes and the budget. 2) The inspection effect, where increased spending leads to reviewing revenue needs. 3) The concentration effect, where spending and revenue stabilize at a new higher level until the next disturbance causes another displacement effect. Along with these effects, it explains the concept of a tolerance level of taxation that a population is willing to tolerate.
11.does the composition of public expenditure matter toAlexander Decker
The document examines the impact of public spending on various sectors on economic growth in Kenya from 1972 to 2008. It finds that:
1) Spending on education had a highly significant positive impact on economic growth, while spending on economic affairs and transport/communication also had a positive impact, though weaker.
2) Spending on agriculture had a significant negative impact on economic growth.
3) Spending on health and defense did not have a significant impact on economic growth.
The findings did not fully conform to the authors' prior expectations about the relationship between public spending and economic growth. The document reviews other literature that has found mixed results on this relationship.
Does the composition of public expenditure matter toAlexander Decker
The document examines the impact of public spending on various sectors on economic growth in Kenya from 1972 to 2008. It finds that:
1) Spending on education had a highly significant positive impact on economic growth, while spending on economic affairs and transport/communication also had a positive impact, though weaker.
2) Spending on agriculture had a significant negative impact on economic growth.
3) Spending on health and defense did not have a significant impact on economic growth.
The findings did not fully conform to the authors' prior expectations about the relationship between public spending and economic growth. The document reviews other literature that has found mixed results on this relationship.
Empirical investigation of the validation of peacock wiseman hypothesis- impl...Alexander Decker
This study examines the direction of causality between government expenditure and revenue in Nigeria from 1961 to 2010. It employs various econometric techniques, including cointegration analysis and Granger causality tests. The results show that government expenditure and revenue converge to a long-run equilibrium relationship. Additionally, there is unidirectional causality running from expenditure to revenue, supporting the Peacock-Wiseman hypothesis that government spending leads to increased revenue collection. This finding implies the hypothesis holds true in Nigeria in both the short-run and long-run, indicating that spending decisions typically precede revenue decisions.
Statistical Analysis of Interrelationship between Money Supply Exchange Rates...Atif Ahmed
Several researches have been conducted to study the impact of different macro-economic variables and their influence on government expenditure. By using different statistical tools researchers have examined that how money supply and exchange rate influence the government expenditure. Few other studies also conducted work on the quarterly time series data to examine the long run equilibrium association between the macroeconomic variables.
The impact of government agricultural expenditure on economic growth in zimbabweAlexander Decker
This document summarizes a study that investigated the impact of government agricultural expenditure on economic growth in Zimbabwe from 1980 to 2009. The study employed a log linear regression model with gross domestic product as the dependent variable and factors such as government expenditure on agriculture, investment, and consumption as explanatory variables. The regression analysis found that increased spending on agricultural research and development can improve economic growth. However, insufficient government expenditure on agricultural extension and credit assistance adversely affected economic growth in Zimbabwe. The results provide evidence that agriculture is an engine of economic growth in the country.
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.
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.
This document discusses the relationship between economic growth and unemployment rates. It finds that a persistently high unemployment rate remains a concern for Congress. While the unemployment rate has declined since peaking in 2009 and 2010, it remains elevated by historical standards. The key driver of unemployment over the long run is the rate of economic growth compared to potential growth. For unemployment to significantly decline, growth needs to outpace the combined growth of the labor force and productivity. Recent recoveries, including from the 2007-2009 recession, have seen slow declines in unemployment, described as "jobless recoveries."
This document discusses how governments can overcome inflation through monetary and fiscal policies. It explains that monetary policy uses interest rates and open market operations to control the money supply. Through open market operations, the central bank sells securities to lower bank reserves and restrict lending. Reserve requirements can also tighten the money supply by requiring banks to hold more reserves. Fiscal policy involves increasing taxes or reducing government spending to decrease spending in the economy. These contractionary policies aim to slow economic growth and reduce inflation.
This document provides an introduction to macroeconomics, including its key topics and goals. It discusses that macroeconomics studies aggregate economic measures of an economy, compared to microeconomics which focuses on individual agents. The main macroeconomic goals covered are low unemployment, price stability, and economic growth. These goals can sometimes complement each other, such as low unemployment and high growth, but can also conflict, such as low unemployment and low inflation. It also outlines some of the key principles of economics, including scarcity, rational self-interest, opportunity costs, and that decisions are made at the margin.
The document summarizes research from the Congressional Budget Office on inflation and the Phillips curve. It finds that while the aggregate Phillips curve is quite flat, estimating the relationship at the component level reveals differences between goods and services inflation. Services inflation remains procyclical, driven by domestic factors, while goods inflation has become less procyclical in recent decades due to globalization and other structural forces. The document also examines how measures of inflation expectations have evolved from being backward-looking to becoming more anchored, though consumers' expectations remain more responsive to shocks than professionals' forecasts.
This document summarizes a study that investigated the relationship between government expenditure and revenue in Nigeria and Ghana using Dynamic Ordinary Least Squares estimation. The study found:
1) There is bidirectional causation between government expenditure and revenue in both countries, supporting the fiscal synchronization hypothesis.
2) Changes in expenditure have a negative impact on revenue in Nigeria but positive impact in Ghana.
3) Changes in past expenditure values positively impact changes in revenue in Nigeria.
This document provides definitions and concepts related to macroeconomics and the macroeconomic environment of business. It defines macroeconomics as the study of the overall economy and discusses key macroeconomic objectives, indicators, and policies. It also explains concepts like GDP, GNP, inflation, money supply, and how they are measured. National income accounting and different economic systems are also summarized.
This document provides an introduction to macroeconomics, including its key topics and goals. It discusses that macroeconomics studies aggregate economic measures of an economy, unlike microeconomics which focuses on individual agents. The main macroeconomic goals covered are low unemployment, price stability, and economic growth. These goals can be complementary, like low unemployment and high growth, or conflicting, such as low unemployment and low inflation. The document also outlines several key principles of economics, including scarcity, rational self-interest, opportunity costs, and decisions made at the margin. It provides graphs about unemployment rates in the U.S. over time and examples of how these principles apply.
This document analyzes the relationship between inflation and economic growth in Qatar from 1980 to 2016. It finds that inflation and economic growth are cointegrated, indicating a long-run relationship. A Granger causality test shows causality runs from inflation to economic growth. The study uses time series analysis methods including unit root tests, Johansen cointegration, and Granger causality tests. Unit root tests show inflation and economic growth are non-stationary in levels but stationary in first differences. Johansen cointegration finds the variables are cointegrated, implying a long-run equilibrium relationship. The Granger causality test then finds causality runs from inflation to economic growth in the long-run.
This document discusses key economic indicators like inflation and unemployment. It defines inflation, lists common inflation measures like the CPI and PPI, and outlines drawbacks of the CPI. Unemployment is defined as those without a job but seeking work. Common types of unemployment include frictional, structural, and cyclical. Factors like minimum wages and recessions can impact unemployment levels.
What Is Inflation. Describe In Details.written By Rizwan Rizvi Rizwan Hussainy
This document discusses inflation in three paragraphs. It defines inflation as a rise in general prices over time which reduces purchasing power. Inflation is measured through indexes like the wholesale price index (WPI), consumer price index (CPI), and GDP deflator. The WPI tracks wholesale goods prices while the CPI tracks consumer goods and services prices. Demand-pull and cost-push inflation are also summarized, where demand-pull results from increased aggregate demand and cost-push from higher production costs reducing supply. The government uses monetary, fiscal, and price policies like controlling the money supply, taxes, and subsidies to check inflation.
The impact of the international price index on vietnam stock marketNghiên Cứu Định Lượng
- The document analyzes the impact of international price indices like gold, crude oil, and the S&P 500 market value (SP500) on Vietnam's stock market index (VNINDEX) from 2008 to 2013 using GJR-GARCH and ARDL models.
- The results show that SP500 has an immediate positive impact on VNINDEX, while lagged values of VNINDEX, crude oil prices, and SP500 also positively impact VNINDEX.
- The GJR-GARCH model found that positive and negative shocks to the market have similar effects on the variance of VNINDEX.
Demand for money in hungary an ardl approach by nikolaos dritsakisBalaji Bathmanaban
This study examines the demand for money in Hungary using quarterly data from 1995 to 2010 within an autoregressive distributed lag (ARDL) framework. The results of the bounds test confirm a stable, long-run relationship between M1 real monetary aggregate, real income, inflation rate, and nominal exchange rate. Specifically, real income has a positive impact on money demand while inflation and exchange rates have negative impacts. Stability tests also reveal a stable money demand function over the period examined, indicating M1 is a suitable intermediate target for monetary policy in Hungary.
Socio political instability and foreign direct investments in ghana an ardl ...Alexander Decker
This document summarizes a study that examines the impact of socio-political instability during national election periods in Ghana on foreign direct investment (FDI) inflows. The study uses an autoregressive distributed lag bounds cointegration approach to analyze quarterly data from 1992 to 2010, during which Ghana had five national elections. The results indicate that socio-political instability exerts a negative influence on FDI inflows in both the short- and long-run. The paper concludes that Ghana needs to limit tensions during election periods in order to maintain competitiveness as an FDI destination in West Africa and globally.
This summary provides an overview of the document:
1) The document investigates the impact of monetary policy rate, interbank rate, and savings deposit on inflation rate in Nigeria from 2006-2014 using an autoregressive distributed lag model.
2) The results of the long-run model show that monetary policy rate, interbank rate, and savings deposit were all negatively and significantly affecting inflation rate during the period studied.
3) In the short-run, monetary policy rate and interbank rates were found to negatively and significantly determine inflation fluctuations, while savings deposit had a positive but insignificant impact.
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
This document summarizes a study that empirically examines the relationship between financial liberalization and economic growth in Nigeria from 1981-2012. It begins by providing background on Nigeria's financial system and the gradual process of financial liberalization that began in 1986 and included deregulating interest rates and opening the banking sector to more private competition. The study uses three measures of financial liberalization - an index of financial openness, money supply as a share of GDP, and private sector credit as a share of GDP - to analyze the long-run and short-run relationship with economic growth. The results suggest there is a positive long-run equilibrium relationship between financial liberalization and growth, supporting the view that financial liberalization contributed to financial development and economic
This document analyzes the relationship between economic growth and energy consumption in Nigeria using a multivariate cointegration approach. It tests for long-run cointegration and short-run causality between GDP, capital, labor, real exchange rate, and energy consumption at both aggregate and disaggregate levels. The empirical findings indicate long-run cointegration between the variables at aggregate and disaggregate levels, except for coal. In the short-run, Granger causality runs only from GDP to electricity consumption. The study proposes policies to address Nigeria's energy and development challenges, such as enhancing energy supply and efficiency, diversifying energy sources, and developing appropriate policies.
The document discusses how to perform various mathematical operations and regressions in Excel and EViews. It explains how to add, subtract, multiply and divide columns or variables in both programs using functions like SUM, GENR. It also explains how to calculate logs and perform simple and multiple linear regressions by using the regression tool in Excel or by writing commands like LS in EViews.
The choice of the exchange policies in the primary commodity exporting countr...Alexander Decker
This document analyzes the exchange rate policies of Morocco and estimates the equilibrium real exchange rate of the Moroccan Dirham. It uses an autoregressive distributed lag model to estimate the long-run relationship between the real exchange rate and macroeconomic fundamentals like terms of trade, degree of openness, government expenditure, and net capital flows. The results suggest that Morocco's fixed exchange rate regime adopted in 1973 is not responsible for its trade deficit or low export growth, as the Dirham's value is close to its equilibrium level. However, other factors may be contributing to Morocco's low economic performance. The document examines theories on how exchange rates and macroeconomic variables interact and equilibrium exchange rates are estimated.
Dynamic linkages between transport energy and economic growth in mauritiusAlexander Decker
This document summarizes a journal article that investigates the relationship between transport energy consumption and economic growth in Mauritius from 1970 to 2010. It finds a unidirectional causality from economic growth to transport energy consumption in the long run, indicating that increased economic activity leads to higher energy use for transport. However, it also finds a bidirectional relationship between transport energy and investment, suggesting that restricting energy use could negatively impact investment and long-term growth. The article discusses the implications of these results for energy and climate policy in Mauritius.
6. bounds test for cointegration within ardl or vecm Quang Hoang
This document discusses using the bounds test approach within an autoregressive distributed lag (ARDL) model to test for cointegration and causality between time series variables. The ARDL model estimates error correction models involving the change in one variable (ΔYt or ΔXt) regressed on lags of itself and the other variable. The bounds test involves calculating an F-statistic and comparing it to critical value bounds - if the F-statistic exceeds the upper critical value bounds, then there is cointegration, and if it falls below the lower bounds, then there is no cointegration. The document provides the null and alternative hypotheses for the bounds test when each variable is the dependent variable in the error correction model. It also outlines the
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
Budget Deficit and Real Exchange Rate: Further Evidence From Cointegration an...Conferenceproceedings
This document provides an abstract for a paper presented at an economics conference that investigates the dynamic relationship between budget deficit and real exchange rate in Laos from 1980 to 2010. The study uses ARDL cointegration methodology, VAR, and SVAR analysis and finds no long-run relationship or Granger causality between budget deficit and real exchange rate in Laos. The purpose is to determine if increasing government spending from resource sectors leads to real exchange rate appreciation, a factor of the Dutch disease.
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.
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.
The role of cotton textile in the economic growth of pakistanAsia Rafique
This document discusses the cotton textile industry of Pakistan. It contains the following key points:
- The cotton textile industry is the backbone of Pakistan's economy, contributing significantly to GDP and exports. It is one of Pakistan's most important industries.
- Pakistan is a major global producer and exporter of cotton and cotton textiles. However, the industry faces challenges from fluctuating cotton prices and macroeconomic instability.
- The document examines the relationship between cotton textiles, GDP, and exports in Pakistan from 1975 to 2011 using econometric modeling. It finds the cotton textile industry has a positive impact on economic growth as measured by GDP.
- Pakistan's textile industry needs support through improved quality
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.
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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
A jointventure project of ARDL & Falguni Consumers ProductsSUMSUN NAHAR MOONNI
Join and Be a Social Network (sn) Friend, Contribute, Promote, Brand, Do Team Work, Built Currier, Be Self Dependent and Earn with our ESHO communities. Want to list yourself as a supporter? Just register your mobile number sending an inbox with short bio and social network id to +8801787811637, or mail me eshoardl@gmail.com or sn.moonni76@gmail.comfor more info www.eshoardl.com
The project ESHO design by Architect Sumsun Nahar Moonni ,Bachelor of Architecture, Bangladesh University of Engineering and Technology (BUET), MANAGING DIRECTOR PROJECT CO-COORDINATOR AND C.E.O. of ARCHITECTURE RESEARCH AND DEVELOPMENT GROUP and SOCIAL NETWORK http://www.facebook.com/ArchitectureResearchAndDevelopmentLtd, www.eshoardl.com , https://www.linkedin.com/profile/public-profile-settings?trk=prof-edit-edit-public_profile , https://twitter.com/snmoonni , https://plus.google.com/+SumsunNahar , www.archh.com/m/snmoonni
Revisiting the link between government spending and economic growth in the pr...iosrjce
IOSR Journal of Economics and Finance (IOSR-JEF) discourages theoretical articles that are limited to axiomatics or that discuss minor variations of familiar models. Similarly, IOSR-JEF has little interest in empirical papers that do not explain the model's theoretical foundations or that exhausts themselves in applying a new or established technique (such as cointegration) to another data set without providing very good reasons why this research is important.
11.co integration and causality results for the dominican republicAlexander Decker
This study examines the relationship between national income and government spending in the Dominican Republic from 1960-1984 and 1985-2005.
For 1960-1984: The results show co-integration between GDP and government consumption spending. A 1% increase in GDP led to a 1.39% increase in government spending, supporting Wagner's law. Granger causality tests also show causality running from GDP to government spending.
For 1985-2005: The results also confirm co-integration between GDP and government spending. However, the elasticity is below 1 (0.78%). Granger causality still runs from GDP to government spending.
Overall, the results show that Wagner's law is valid for both periods in
A trivariate causality test among economic growth, government expenditure and...Alexander Decker
This study examines the causal relationships among economic growth, government expenditure, and inflation rate in Nigeria from 1970 to 2010. It finds:
1) The variables are cointegrated, though not in their level form.
2) There is bidirectional causality between government expenditures and economic growth in both the short-run and long-run.
3) In the short-run, there is unidirectional causality from economic growth and government expenditure to inflation rate, but no feedback from inflation rate.
The study recommends that government implement policies to moderate spending in order to reduce inflation, and lower lending rates to encourage private investment and compensate for reduced economic growth from lower government spending.
11.a trivariate causality test among economic growth, government expenditure ...Alexander Decker
This study examines the causal relationships among economic growth, government expenditure, and inflation rate in Nigeria from 1970 to 2010. It finds:
1) The variables are cointegrated, indicating a long-run relationship.
2) There is bidirectional causality between government expenditures and economic growth in both the short-run and long-run.
3) In the short-run, there is unidirectional causality from economic growth and government expenditure to inflation rate, but no feedback from inflation rate.
The study recommends moderating government spending and lending rates to reduce inflation and encourage private investment.
The document discusses analyzing the relationship between financial deepening and economic performance in MENA countries using spectral time series analysis. Spectral analysis decomposes time series data into different frequency components, allowing the relationship to be studied at short, medium, and long time horizons without subdividing the study period. Estimates show the real and financial sectors maintain causal relationships at high frequencies, challenging conventional methods. In the long term, finance dominates economic growth in some GCC countries while the opposite is true in other countries. The main conclusion is the causal relationship between finance and growth varies depending on the time horizon used.
Using Granger Causality to Examine the Relationship Between Economic Growth a...inventionjournals
This study refers to Okun's Law on the economy in North Sumatera Province. Difference with previous studies, in this study the data used is not aggregate data but the data of each economic sector. In addition, the unemployment variable is proxy with the absorption of labor rate. The data analysis was tested by Granger Causality to determine the direction of the relationship between variables for growth of each economic sectors and absorption of labor. By using the Granger Causality Test analysis we concluded that the agricultural sector has a two-way direction relationship between economic growth and absorption of labor. Mining and Quarrying sector, construction sector, transport and communication sector and services sector only have one-way direction relationship from absorption of labor to economic growth. Electricity, gas and water supply have one-way direction relationship from economic growth to absorption of labor. Three other sectors are sectors manufacturing industry sector; trade, hotel and restaurant sector and finance, real estate and business service have no relationship at all between economic growth and absorption of labor.
Mono mode versus multiple modes in the context of complexity economics throug...Dr. Vignes Gopal
This document provides a summary of a paper presented at the ICEFMO 2013 conference in Malaysia. The paper discusses mono and multiple modes of complexity economics through modified versions of meso-trajectory phases of innovation and Metcalfe's Law. It evaluates the interaction effects between Rahn-Armey Curve, Buchanan's Taxonomy, and Wagner's Law on government expenditure and economic growth. It also presents a modified version of Metcalfe's Law and meso-trajectory phases of innovation that integrate factors like animal spirits, asymmetric information, and the roles of different economic agents. The concluding remarks emphasize the need to capture these complex interactions and factors through modified approaches to better understand evolving complexity economics.
This study examines the asymmetric impact of exchange rate changes on stock prices in Germany using monthly data from January 1993 to April 2017. Linear and nonlinear autoregressive distributed lag (ARDL) models are used. The results show that negative changes in the exchange rate (currency devaluation) significantly affect stock prices in the long-run, indicating an asymmetric impact. However, in the short-run, exchange rate changes have a symmetric effect. Diagnostic tests confirm the validity of the nonlinear ARDL model. This empirical evidence suggests that currency devaluations specifically impact German stock prices. The findings provide useful information for policymaking and forecasting the effects of exchange rate fluctuations on the stock market.
An empirical analysis of the incidence of corporate income taxAlexander Decker
This document summarizes a study on the incidence of corporate income tax in Ghana from 1997-2006. The study uses regression analysis of financial statement data from 10 manufacturing companies. The results showed:
1) A negative relationship between returns to shareholders and tax, indicating returns decrease as tax increases.
2) A negative relationship between labor costs and tax, indicating wages decrease as tax increases.
3) A positive relationship between gross profit percentage and tax, indicating consumer prices may increase as tax increases.
Rent Seeking Opportunities and Income Inequality in Africaiosrjce
This document summarizes a study that examined the impact of rent seeking opportunities on income inequality in 31 African countries from 1990 to 2005. Rent seeking was measured using bureaucratic quality and corruption indices as proxies, while income inequality was measured using Gini coefficient estimates. Static panel and pool mean group econometric methods were used. The results showed that rent seeking, as measured by bureaucratic quality, was positively related to income inequality, though the relationship was statistically insignificant when corruption was used as the rent seeking proxy. The study contributes to understanding the relationship between rent seeking and income inequality in Africa.
This document analyzes spatial data from Portuguese regions across several economic sectors based on Keynesian theory and spatial econometrics. Productivity is found to exhibit positive spatial autocorrelation, especially in services. All sectors together also show positive autocorrelation in productivity. The study tests Verdoorn's Law relating productivity and output growth using spatial econometric techniques. Models include spatial lag and error components to account for spillover effects between neighboring regions.
This document provides a research report on the relationship between crime and unemployment. It begins with an introduction discussing how decreasing economic incentives can increase criminal activities. It then reviews previous literature that has found a positive relationship between unemployment and various crime categories. Definitions of crime and unemployment are also provided. The report finds that unemployment can increase criminal behavior through reducing opportunities for legal earnings and increasing incentives to engage in criminal acts for monetary gain. Policies to increase employment can thus help reduce crime rates.
Government budget control under the period of inflation: Evidence from Madaga...iosrjce
Madagascar is rich in resource undermine, maritime and natural but have been experiencing
Inflation now for more than four decades. Many studies and papers talk about the relationship between Inflation
and Budget Deficit. This paper seeks to test the hypothesis that budget control explicated by the budget deficit
cause inflation in Madagascar with some variable economically affect the inflation such as Gross Domestic
Product, exchange rate, Money supply, budget deficits and political crises that is during a thirty-three years
period: from 1981to 2014. The methodology employed for estimating long-run relationship is Augmented Ducky
Fuller test for a stationary data then cointegration analysis, with undertaking Granger causality tests. The
findings of the study are Malagasy Budget control is not inflationary and the inflation didn’t explain the budget
control. But the variable that cause the inflation in Madagascar are the Political Crises and Money Supply
An empirical test of the relationship between private savingsAlexander Decker
This study examines the relationship between private savings and economic growth in Kenya over time. It employs econometric techniques including cointegration and Granger causality tests to analyze long-run and short-run relationships using data from 1990-2013. The literature review discusses mixed findings from previous studies on the direction of causality between savings and growth. The study aims to test two hypotheses: 1) private savings cause economic growth, or 2) economic growth causes private savings in Kenya. The results will help inform government policies around promoting savings or growth.
An empirical test of the relationship between private savingsAlexander Decker
This study examines the relationship between private savings and economic growth in Kenya over time. It employs econometric techniques including cointegration and Granger causality tests to analyze long-run and short-run relationships between real GDP and household savings. The literature review discusses prior studies that have found various relationships between savings and growth, including evidence of savings-led growth, growth-driven savings, and bidirectional causality. The study aims to determine the direction of causality in Kenya in order to inform government policies regarding private savings and economic growth.
This document discusses spatial data analysis of productivity convergence across regions in Portugal based on convergence theories and spatial econometrics. It analyzes productivity data for different sectors in Portuguese regions using Moran's I statistics, finding positive spatial autocorrelation in productivity for agriculture, services, industry, and total sectors. The document also reviews theories of absolute and conditional convergence and studies examining spatial effects on productivity convergence. It proposes using spatial econometric models and specification tests to analyze conditional productivity convergence across Portuguese regions from 1995 to 2002 while controlling for spatial effects.
This document summarizes a study that analyzed the impact of several macroeconomic indicators (money supply, exchange rate, oil prices, and interest rate) on inflation in Kenya from 2003-2013. Using vector error correction modeling and Granger causality tests, the study found that:
1) All variables except exchange rate had positive and significant effects on inflation in the long run.
2) In the short run, only interest rates and money supply significantly impacted inflation.
3) Changes in inflation Granger caused changes in oil prices, and changes in interest rates Granger caused changes in inflation.
4) The study concluded inflation in Kenya is triggered by both demand and supply factors, but money supply and oil prices are
Testing for fisher’s hypothesis in nigeria (1970 2012)Alexander Decker
This document summarizes a study that tested Fisher's hypothesis in Nigeria between 1970-2012. The study used quarterly data on interest rates and inflation rates to examine the causal relationship between the two variables. It employed cointegration and Granger causality tests and found that:
1) There is no significant long-run relationship between interest and inflation rates, violating Fisher's hypothesis in the long-run.
2) In the short-run, there is no causal link from interest rates to inflation, but there is a causal link from inflation to interest rates, supporting Fisher's hypothesis.
3) Fisher's hypothesis that nominal interest rates consist of expected inflation plus a real interest rate component is validated in the short-run
The document presents a research thesis on analyzing the impact of fiscal deficit on economic growth in Pakistan. It discusses previous studies that have found both positive and negative correlations between fiscal deficit and economic growth. The study aims to compare the effects of fiscal deficit and other variables like inflation, labor force, interest payments, and capital formation on Pakistan's economic growth. The research will use time series data from 1973 to 2018 and the autoregressive distributed lag model to estimate the relationships. Preliminary results found that fiscal deficit, inflation, and interest payments negatively impact economic growth while capital formation and labor force have positive impacts.
Similar to Revisiting the link between government spending and economic growth in the present of Wagner’s Law in Nigeria (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
1. The document describes a study that designed a balanced scorecard for a nonprofit organization called Yayasan Pembinaan dan Kesembuhan Batin (YPKB) in Malang, Indonesia.
2. The balanced scorecard translated YPKB's vision and mission into strategic objectives across four perspectives: financial, customer, internal processes, and learning and growth.
3. Key strategic objectives included donation growth, budget effectiveness, customer satisfaction, reputation, service quality, innovation, and employee development. Customers perspective had the highest weighting, suggesting a focus on public service over financial growth.
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
- The document examines customer experience in supermarkets and hypermarkets in India through a survey of 418 customers.
- It finds that in supermarkets, previous experience, atmosphere, price, social environment and experience in other channels most influence customer experience, while in hypermarkets, previous experience, product assortment, social environment and experience in other channels are most influential.
- The study provides insights for retailers on key determinants of customer experience in each format to help them improve strategies and competitive positioning.
Social Media and Small Businesses: A Combinational Strategic Approach under 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.
Secretarial Performance and the Gender Question (A Study of Selected Tertiary...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.
Implementation of Quality Management principles at Zimbabwe Open University (...iosrjce
This document discusses the implementation of quality management principles at Zimbabwe Open University's Matabeleland North Regional Centre. It begins with background information on ZOU and the importance of quality management in open and distance learning institutions. The study aimed to determine if quality management and its principles were being implemented at the regional centre. Key findings included that the centre prioritized customer focus and staff involvement. Decisions were made based on data analysis. The regional centre implemented a quality system informed by its policy documents. The document recommends ensuring staffing levels match needs and providing sufficient resources to the regional centre.
Organizational Conflicts Management In Selected Organizaions In Lagos State, ...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.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
5 Tips for Creating Standard Financial ReportsEasyReports
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Revisiting the link between government spending and economic growth in the present of Wagner’s Law in Nigeria
1. IOSR Journal of Economics and Finance (IOSR-JEF)
e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 6, Issue 6. Ver. II (Nov. - Dec. 2015), PP 56-64
www.iosrjournals.org
DOI: 10.9790/5933-06625664 www.iosrjournals.org 56 | Page
Revisiting the link between government spending and economic
growth in the present of Wagner’s Law in Nigeria.
Usman Gambo Ahmad1
and Usman Ali Suleiman2
Faculty of Economics, Accountancy and Management Sciences, Universiti Sultan Zainal Abidin, 21300 Kuala
Terengganu, Terengganu, Malaysia
Department of Economics, Federal University Kashere, Gombe, Nigeria.
Abstract: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.
I. Introduction
The Wagner’s Law that was named after the German political economist Adolph Wagner (1835-1917)
was developed after the empirical analysis in Western Europe at the end of the 19th century (Henrekson, 1993).
He argued that government expenditure is a function of increased industrialization and economic development.
Wagner stated that during the industrialization process, as the real income per capita of a nation increase, the
share of public expenditures in respect to total spending increases. The law cited “The advent of modern
industrial society will result in increasing political pressure for social progress and increasing the allowance for
social consideration by the industry.”
Wagner designed three focal bases for the increase in state expenditure. Firstly, during industrialization
process, the public sector activity will replace a private sector activity. State functions like administrative and
protective functions will increase. Secondly, governments need to provide cultural and welfare services such as
education, public health, pension, subsidy, emergency aid and environmental protection programs. Thirdly,
increased industrialization will lead to technological advancement, and large firms will tend to monopolize the
industries. Therefore, Governments will have to offset these effects by providing social and merit goods through
budgetary means (Khan, 1990). Wagner argued that public expenditure is determined by the growth of national
income. Therefore, national income is the cause of government spending. His Law tends to be a long-run
phenomenon. That is, the longer the period, the better the economic interpretations.Moreover, for the theory to
be realized, it will take an economy with a modern industrialization fifty to hundred years.
Also, Wagner's theory has been proven through empirical analysis for some nations usingboth time
series and cross-sectional data sets. The exact results, aside from a couple of individual cases give asolid
backing to it.These studies include Peacock and Wiseman (1961), Musgrave (1969), Michas (1975), Mann
(1980), Ram (1986, 1987), and Khan, (1990), Aregbeyen (2006) and Rehman et al., (2010).However, for the
exceptional cases, Henrekson, (1993) found no support in the case of Sweden.Similarly, the work of
Hondroyiannis and Papapetrou (1995) discovered thatWagners law does not hold in the case ofGreece based on
the Johansen cointegration analysis.
The outcome of other studies in Nigeria regarding Wagner’s hypothesis proved to be in support of the
theory; others are not in support of it, while other is ambiguous. For example, empirical studies that support the
existence of Wagner law in Nigeria areAregbeyen(2006);Ogbonna(2012);Dada and Adewale(2013);Ibok
andBassey(2014). On the other hand, those that found no existence of the law areChimobi(2009);Ighodaro
andOriakhi(2010); Akpan(2011);Sevitenyi(2012). Lastly, those that found bi-directional and non-existence of
the law areUdo andEffiong(2014)and Owolabi(2015) respectively.
Due to inconsistency in the findings of previous studies, the present study intends to revisit the causal
relationship between government expenditure and economic growth using an up to date econometric tools of
analysis.In revisiting the relationship, we first of all, use annual data for Nigeria for the period of 1972–
2011.The time-series component of the data and order of integration are tested through the Augmented Dickey–
Fuller(ADF, 1981)and Philip Perron (PP, 1988). Follow by the cointegration analysis, which the study adopt
2. Revisiting the link between government spending and economic growth in the present of …
DOI: 10.9790/5933-06625664 www.iosrjournals.org 57 | Page
two methods. First, we employed the most widely used ARDL approach (Pesaran et al., 2001), followed by
combined cointegration test proposed by Bayer and Hanck (2013), to test Wagner’s hypothesis based on the
functional form as used by the previous scholars. For this study to capture the real picture of the scenario, the
functional form is augmented as suggested by Murthy (1994). Finally, the causal relationship will be addressed
by ARDL Wald test.
The other part of this paper is organized as follows. Section 2 briefly discussesliterature review
regarding variousWagner’s hypothesis versions, together with empirical findings of the causal relationship
between government expenditure andeconomic growth. Section 3 explains the econometric toolsused in the
study. Section 4 presentsthe empirical results, whileSection 5 presents the concluding remarks.
II. Literature Reviewof Wagner’s Hypothesis Versions
The positive relationship between government expenditure and economic growth is seen as the pivot to
Wagner’s law. However, the interpretation of the functional form of the law seems to be controversial, as a
result of theintroduction of different versions, which havebeen empirically tested since the 1960s. These
versions are as follows:
𝐺𝐸 = 𝑓 𝐺𝐷𝑃 (1)
𝐺𝐶𝐸 = 𝑓 𝐺𝐷𝑃 (2)
𝐺𝐸
𝐺𝐷𝑃
= 𝑓 𝐺𝐷𝑃 (3)
𝐺𝐸 =
𝐺𝐷𝑃
𝑁
(4)
𝐺𝐸
𝑁
= 𝑓
𝐺𝐷𝑃
𝑁
(5)
𝐺𝐸
𝐺𝐷𝑃
= 𝑓
𝐺𝐷𝑃
𝑁
(6)
Where GE refers to total government expenditure, GCE means government consumption expenditure,
GDP is agrossdomestic product, which is used as a proxy for economic development, and N is the
population.The functional form of equation (1)isreferred to asPeacock – Wiseman (1961) version of Wagner
hypothesis.As cited in Halicioglu (2003), the relationship of the first version between government expenditure
and national income wasgraphically established.Which was later used by Musgrave (1969), and Goffman and
Mahar (1971).Pryor (1968) adopted the functional form of equation (2). The third equation was amodification of
the first equation and was introduced by Mann (1980).The functional form of equation (4) is linked to Goffman
(1968) and the version of equation (5) to Gupta’s (1967), which was later used by Michas (1975).In addition, the
last version of equation (6) was introduced by Musgrave (1969) and adopted by Ram (1986), Murthy (1993),
Henrekson (1993), Hsieh and Lai (1994) and Halicioglu (2003). However, the significant difference of the
above versions of Wagner Law is the measurement of government expenditure and national income. Also, the
last version is often used and is considered most appropriate one (Halicioglu, 2003).
Halicioglu (2003) used annual time series data spanning from 1960-2000 to investigate the present of
Wagner Law in Turkey. Based on the econometric tools employed, the study found no support for the presence
of Wagner’s Law. However, when the model was augmented, the study found significant and statistical
evidence for the new version. Similarly, Dependra (2007) examine the present of Wagners Law in Thailand
using annual time series data from 1950-2003. The study found no statistical evidence supporting the presence
of Wagner law.Chimobi (2009) applied the Johansen multivariate approach and Granger causality test on annual
time series data from 1970-2005 and found no existence of Wagner Law in Nigeria. IghodaroandOriakhi (2010)
employed VAR model with Gaussian errors on annual time series data from 1961-2007 in Nigeria and found no
evidence of Wagner’s Law existence. Furthermore, Akpan (2011) and Sevitenyi (2012) employed annual time
series data from 1970-2008 and 1961-2009 respectively. Based on their methods of analysis, they found no
support for Wagner’s Law in Nigeria.
On the other hand, Ogbonna (2012) examined the presence of Wagner Law in Nigeria using annual
time series data covering the period 1950-2008.The study employed the Johansen maximum likelihood
cointegration method, error correction modeling, and the Granger causality test and concluded that Wagner Law
is present in Nigerian economy. Similarly, Dada and Adewale; Alimi; (2013) and Ibok and Bassey (2014)
employed annual time series data and econometric tools to investigate the present of Wagner’s Law in the
context of Nigerian economy.Based on each of the methods adopted, their study found the existence of
Wagner’s Law.
3. Revisiting the link between government spending and economic growth in the present of …
DOI: 10.9790/5933-06625664 www.iosrjournals.org 58 | Page
III. Framework,Data, Method, And Results
To revisit the link between government expenditure and economic growth, the study adopts the
functional form of Wagner’s law as shown in equation (1).The functional form tries to examine the relationship
between total government expenditure and economic activity as opined by Peacock – Wiseman (1961), which
was later adopted by Musgrave (1969), and Goffman and Mahar (1971).Therefore, the functional form can be
written in a linear form as:
𝐺𝐸𝑡 = 𝜑0 + 𝛽1 𝐺𝐷𝑃𝑡 + 𝜀𝑡 7
However, this study intends to add a new dimension to the above model (i.e. equation 7) by squaring
the GDP and as well including a dummy that captures the period of structural adjustment program (SAP).The
reason behind the square of GDP is to validate Wagner’s claim that increase in economic activities leads to
anincrease in government expenditure. As such, the new augmented linear model is captured as:
𝐺𝐸𝑡 = 𝜑0 + 𝛽1 𝐺𝐷𝑃𝑡 + 𝛽2 𝐺𝐷𝑃𝑡
2
+ 𝛽3 𝐷𝑈𝑀𝑡 + 𝜀𝑡 8
Where 𝐺𝐸𝑡 refers to total government expenditure, 𝜑0 is the constant term, 𝛽1 and𝛽2 are the
coefficients with positive expected sign, 𝐺𝐷𝑃𝑡 is the gross domestic product used as a proxy foreconomic
growth,𝐺𝐷𝑃𝑡
2
is the squared of GDP,𝐷𝑈𝑀𝑡 represent structural adjustment program, and 𝜀𝑡 is the error term.
The sample data for this study span from 1972-2011. The total government expenditure is the total of
government spending at thefederallevel; the gross domestic product is the total value of all goods and services
produced. Also, all the variables are measured in current USD and sourced from World Bank Development
Indicators.
Prior to revisiting the link between government expenditure and economic growth, it is assumed that
the said time series are stationary. Stationary here implies that the distribution of a process remains unchanged
when shifted in time by an arbitrary value. Precisely, a stochastic process is said to be weakly stationary if its
mean and variance are not moving over time. Moreover, the value of the covariance between the two periods
depends only on the distance or gap between the two periods and not the actual time at which the covariance is
computed. A time series is strictly stationary if all the moments of its probability distribution are invariant over
time.The usual stochastic process is fully specified by its two moments, the mean and the variance (Gujarati,
2003).
The stationery of a variable depends on whether it has a unit root. If the variable has a unit root, then it
is non-stationary. Thus, regression involving unit root series can falsely imply the existence of a meaningful
economic relationship. The first task in analyzing econometric time series data should then be testing for the
presence of unit roots. In this case, it is necessary to test the order of integration of each variable to know how
many times the variable needs to be differentiated to result in a stationary series. However, estimating non-
stationary models by eliminating trends in variables or by transforming the data to make them stable through the
process of differentiation cannot be a solution.This procedure throws away potentially valuable information
about the long-run relationship, about which economic theories have a lot to say (Harris, 1995; Enders, 1995).
Therefore, the studyused two methods to test for stationary in the data. This test includes Augmented
Dickey-Fuller (1981) and Philip and Perron (1988). First, we begin with theAugmented Dickey-Fuller (ADF)
test that was an extension of Dickey-Fuller test for stationary. The augmentation is adding lagged values (p) of
first differences of the dependent variable as additional regressors, which are required to account for the possible
occurrence of autocorrelation. The ADF test estimates the following regressions.
∆𝑌𝑡 = 𝛿𝑌𝑡−1 + 𝑖𝛽𝑖∆𝑌𝑡−𝑖+1 + 𝜀𝑡 9
𝑘
𝑖=2
∆𝑌𝑡 = 𝛼0 + 𝛿𝑌𝑡−1 + 𝑖𝛽𝑖∆𝑌𝑡−𝑖+1 + 𝜀𝑡 10
𝑘
𝑖=2
∆𝑌𝑡 = 𝛼0 + 𝛿𝑌𝑡−1 + 𝑖𝛽𝑖∆𝑌𝑡−𝑖+1 + 𝛼1 𝑇 + 𝜀𝑡 (11)
𝑘
𝑖=2
Testing for unit roots using equation (9) assumes that the underlying data generating process has no
intercept term and time trend. To account for the existence of an intercept term, equation (10) is used. Equation
(11) suggests using intercept and deterministic term to test for the unit root. The unit root test is carried out
based on the null hypothesisthat the series contain unit root (δ=0) against the alternative hypothesis that, the
series has no unit root (δ< 0).
4. Revisiting the link between government spending and economic growth in the present of …
DOI: 10.9790/5933-06625664 www.iosrjournals.org 59 | Page
Secondly, the Philip and Perron (1988) test that is among the conventional unit root test. Its application
in time series analysis is to test the null hypothesis that a time series is integrated of order one I(1). The Phillips-
Perron test was form based on Dickey–Fuller test. However, the Phillips-perron test invalidates the dicky-fuller
test because he believes that the process of collecting data for 𝑌𝑡 could have a higher order of autocorrelation
than it is expected in the test equation. Therefore, they made 𝑌𝑡−1endogenous in the equation. Furthermore, they
make a non-parametric correction to the t-test statistic. The test is fit with respect to unspecified autocorrelation
and heteroscedasticity in the disturbance process of the test equation.
One possible means of avoiding spurious regression is the application of cointegration techniques,
which allow the estimation of non-spurious regressions with non-stationary data.There are several methods of
determining the cointegration relationship between the series. However, these approaches depend on theorder of
integration of the series. For example, once the variables are integrated at first order I(1), then we can use Engle-
Granger two-step procedure, the Johanson Maximum Likelihood, Johansen-Mosconi-Nielsen cointegration test,
Bayer and Hanck combine cointegration test, Gregory-Hansen cointegration test, and the likes. However, if the
variables have mixed stationary of I(0) and I(1), we cannot use any of the cointegrationtests above except
Autoregressive distributive lag (ARDL) bound test.However, this study used ARDL and combine cointegration
test. The former has the ability to test for cointegration among the variables irrespective of their order of
integration, and the later contains a group of approaches.
The ARDL bound test was introduced originally by Pesaran and Shin (1999) and then extended by
Pesaran et al.(2001). This method has advantages over the other method in the sense that, the order of
integration of the series does not matter if no series is found to have I(2). Also, the approach is more suitable for
small sample size (Haug, 2002). Furthermore, the method can capture the long run and short run simultaneously.
Therefore, the ARDL model based on this study is captured as follows:
∆𝑙𝑛𝐺𝐸𝑡 = 𝜃0 + 𝜃1 𝐷𝑈𝑀1986 + 𝜃2 𝑙𝑛𝐺𝐸𝑡−1 + 𝜃3 𝑙𝑛𝐺𝐷𝑃𝑡−1 + 𝜃4 𝑙𝑛𝐺𝐷𝑃𝑡−1
2
+ 𝛽1∆𝑙𝑛𝐺𝐸𝑡−𝑖
𝑛
𝑡=𝑖
+ 𝛽2∆𝑙𝑛𝐺𝐷𝑃𝑡−𝑗
𝑝
𝑗=0
+ 𝛽3
𝑞
𝑘
∆𝑙𝑛𝐺𝐷𝑃𝑡−𝑘
2
+ 𝜀𝑡 (12)
Where ∆ is the differenced operator and 𝜀𝑡 is the residual term at period t. the Schwarz information
criterion is used in choosing an appropriate lag length of the first differenced regression. As agued by Pesaran
and Shin (1999) and Narayan (2005) Schwarz information criterion performs better than Akaike information
criterion in ARDL model. The proper calculated F-statistic depends on the appropriate lag order selection of the
series to be used in the model. By applying F-test advanced by Pesarsn et al. (2001), the overall significance of
the coefficients of the lagged variables is investigated. The null hypothesis of no long run relationship between
the variables in equation (12) is 𝐻0: 𝜃2 = 𝜃3 = 𝜃4 = 0 against the alternate hypothesis of long run relationship
i.e.𝐻0: 𝜃2 ≠ 𝜃3 ≠ 𝜃4 ≠ 0. Two asymptotic critical values have been advanced by pesaran et al. (2001). The
decision whether the variables are cointegration or not depends on the two asymptotic critical values i.e. the
upper critical bound (UCB) and lower critical bound (LCB). When the variables are integrated at level i.e. I(0),
then , it will be appropriate to use the LCB. But, when the variables are stationary at I(1) or mixed of I(0) and
I(1) then we apply UCB. Furthermore, the cointegrationis said to be present when the computed F-statistic of
equation (12)is greater than UCB. If the computed F-statistic is less than the UCB, then the series are not
cointegrated. However, if the computed F-statistic falls within the UCB and LCB, then the result becomes
inconclusive.
Due to imperfect correlation among the various cointegration approaches, the study further validate the
ARDL bound test by applying Bayer and Hanck (2013) combine cointegration approach. This method of
cointegration is the combination of the computed P-values of different cointegration test, which is specified in
the Fisher’s formulae as follows:
𝐸𝐺 − 𝐽𝑂𝐻 = −2 ln 𝑃𝐸𝐺 + ln 𝑃𝐽𝑂𝐻 (13)
𝐸𝐺 − 𝐽𝑂𝐻 − 𝐵𝑂 − 𝐵𝐷𝑀 = −2 ln 𝑃𝐸𝐺 + ln 𝑃𝐽𝑂𝐻 + ln 𝑃𝐵𝑂 + ln 𝑃𝐵𝐷𝑀 (14)
Where𝑃𝐸𝐺 ,𝑃𝐽𝑂𝐻 , 𝑃𝐵𝑂, and 𝑃𝐵𝐷𝑀 are probability values of individual cointegration tests. The decision
rule is that if the estimated Fisher statistics is greater than Bayer and Hanck critical values, then we reject the
null hypothesis of no cointegration.
Furthermore, the cointegration test and the long-run and short-run results are supported with the
causality test using the Toda-Yamamoto (1995). This approach of causality test provides us with the ability to
test the causal relationship of the variables irrespective of their order of integration i.e. I(0), I(1) or I(2). The
Toda-Yamamotoapproach, unlike the vector error correction method (VECM) causality test, does not require the
5. Revisiting the link between government spending and economic growth in the present of …
DOI: 10.9790/5933-06625664 www.iosrjournals.org 60 | Page
variables to be stationary at first level.Therefore, the Toda-Yamamoto causality model is presented in a VAR
system as:
𝑙𝑛𝐺𝑂𝑉𝑇𝑡 = 𝜎0 + 𝜎1𝑖 𝑙𝑛𝐺𝑂𝑉𝑇𝑡−𝑖
𝑘
𝑖=1
+ 𝜎2𝑗
𝑑 𝑚𝑎𝑥
𝑗=𝑘+1
𝑙𝑛𝐺𝑂𝑉𝑇𝑡−𝑗 + 𝛽1𝑖
𝑘
𝑖=1
𝑙𝑛𝐺𝐷𝑃𝑡−𝑖
+ 𝛽2𝑗
𝑑 𝑚𝑎𝑥
𝑗=𝑘+1
𝑙𝑛𝐺𝐷𝑃𝑡−𝑗 + 𝛿1𝑖
𝑘
𝑖=1
𝑙𝑛𝐺𝐷𝑃𝑡−𝑖
2
+ 𝛿2𝑖
𝑑 𝑚𝑎𝑥
𝑗=𝑘+1
𝑙𝑛𝐺𝐷𝑃𝑡−𝑗
2
+ 𝜑1𝑡 (15)
As shown from the equation (15) above, the null hypothesis of nocausalityis rejected when the P-value
falls within 1-10% level of significance. Therefore, the Granger causality running from 𝐺𝐷𝑃 and 𝐺𝐷𝑃2
to
𝐺𝑂𝑉𝑇is given by𝛽1𝑖 ≠ 0∀𝑖 and 𝛿1𝑖 ≠ 0∀𝑖 respectively.
IV. Results And Discussion
Table 1 below reports the descriptive statistic. The result by Jarque-Bera test proved that all the variables are
normally distributed with zero mean and constant variance.
Table 1 Descriptive statistics
ln govt ln gdp ln gdp2
Mean 4.995 11.776 139.985
Median 4.895 11.631 135.292
Maximum 6.633 13.804 190.557
Minimum 3.165 10.043 100.857
Std. Dev. 1.075 1.158 27.523
Skewness 0.028 0.180 0.267
Kurtosis 1.630 1.632 1.686
Jarque-Bera 3.135 3.335 3.354
Probability 0.209 0.189 0.187
Sum 199.815 471.046 5599.385
Sum Sq. Dev. 45.029 52.268 29543.18
Observations 40 40 40
Notes: ln govt=log of total government expenditure, ln gdp=log of gross domestic product at current USD and ln
gdp2
is thesquare of ln gdp.
Table 2 ADF and PP unit root analysis
Variables ADF test PP test
Intercept Intercept and Trend Intercept Intercept and Trend
lngovt -0.790 -2.116 -0.790 -2.143
∆lngovt -7.163*** -7.142*** -7.145*** -7.087***
lngdp 0.794 -1.680 0.814 -1.699
∆ln gdp -6.043*** -6.086*** -6.044*** -6.088***
ln gdp2
1.375 -1.520 1.440 -1.520
∆ln gdp2
-6.016*** -6.313*** -6.017*** -6.313***
Note: *** indicates significant at 1% level.
The series have unit root problem at level in both models i.e. intercept, and intercept and trend as
shown in Table 2. However, the variables are found to be integrated at first difference. This means all the
variables are stationary at I(1) and have the same level of integration. The outcome in Table 2 satisfied the
precondition of using ARDL bound test to cointegration as none of the variablesis integrated at I(2).
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The suitable lag order selection of the variables is important for ARDL bounds model specification.As shown in
Table 3, LR, FPE, and AIC tests statistic chose2lag respectively. However, SC and HQ criterion chose1 lag.
Therefore, the study used the SC criterion as suggested by Narayan, (2005), Pesaran and Shin, (1999).
Table 3 Lag length selection.
Lag LL LR FPE AIC SC HQ
0 -77.294 NA 0.012 4.118 4.246 4.164
1 101.748 321.357 2.02e-1 -4.602 -4.091* -4.419*
2
112.547 17.721* 1.86e-1* -4.695* -3.799 -4.373
3
120.389 11.663 2.02e-1 -4.635 -3.356 -4.176
Notes: LR: Sequential modified LR test statistic, FPE: Final prediction error, AIC: Akaike information criterion,
SC: Schwarz information criterion, and HQ: Hannan-Quinn information criterion. * indicates lag order selected
by criterion
Table 4 The ARDL bound test to cointegration.
Dependent variable Independent variables Dummy F-statistic Decision
lngovt lngdp, lngdp2
, 1986 4.950*** Cointegration exists
Asymptotic critical value 99% critical bounds 95% critical bounds
I(0) I(1) I(0) I(1)
5.593 6.333 3.937 4.523
Note: *** and ** indicates significant at 1% and 5% level respectively
The estimated results presented in Table 4 provide the ARDL bound test to cointegration. The
empirical evidence shows that the computed F-statistic is greater than Narayan (2005) critical value at 5% level
of significance. Meaning,cointegrationexists among the variables. To check the robustness and reliability of the
cointegration relation among the variables, Bayer and Hanck (2013) is applied. As shown in Table 5, all the
individual cointegration methods justify the existence of a long run relationship among the variable at adifferent
level of significance. Furthermore, the combined test of all the methods (i.e. EG-J-Banerjee-Boswijk) proved the
existence of cointegration among the variables at 5% level of significance.
Table 5 Bayer-Hanck combines cointegration.
Lag length EG Johansen Banerjee Boswijk EG-Johansen EG-J-Banerjee-
Boswijk
K=1 -3.933**
(0.028)
36.572*** (0.000) -3.590**
(0.040)
29.907***
(0.000)
24.214** 49.078**
Notes: EG-Johansen critical value at 5% is 10.895; EG-J-Banerjee-Boswijk critical value is 21.106. While ***
and ** represents 1% and 5% respectively.
Table 6 presents the long run coefficients of the ARDL model. The estimated coefficient of GDP is
positive and significant at 1 % level. This implies that 1 % increase in GDP will amount to 2.6 % increase in
government expenditure, all things being equal.This result is in line with the findings ofRehman et al. (2010),
Ogbonna(2012),Ibok and Bassey(2014) in Pakistan and Nigeria respectively.However, the square of GDP has a
negative sign and is statistically significant at 5 % level.This shows that increase in GDP has adiminishing
return as 1% increase in economic activities leads to 7 % decrease in government expenditure.
The short run results showed that both GDP and the square of GDP are statistically significant with a
positive coefficient at 5 % and negative coefficient 10 % respectively. The negative sign on the error correction
term indicates the expected speed of adjustment from the short run to the long run dynamics. The expected sign
implies that 60 % of the disequilibrium from the previous year’s shocks adjusts back to the long run equilibrium
in the present year.
In addition, the diagnostic test, which includes Lagrange multiplier test of residual serial correlation;
heteroscedasticity; Ramsey’s RESET test proved that the diagnostic test reject the null hypothesis. This
impliesthat the coefficients of the long run and ECM are free from serial correlation, heteroscedasticity.
Moreover, the equations are free from any functional form misspecification. The plots of the CUSUM and
CUSUMSQ statistics are within the critical bounds. This implies that all coefficients in the ECM model are
stable over the period of analysis (i.e. 1972-2011).
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Table 6 Long-and-short run analysis.
Dependent variable: ln govt
Variables Coefficient Std. error Prob. value
Long run results
Constant -15.5254*** 0.11229 0.001
ln gdp 2.5809*** 0.74551 0.001
ln gdp2
-0.070145** 0.030300 0.027
dummy 0.0086168 0.11229 0.939
Short run results
Constant -9.4442** 3.6540 0.014
∆ln gdp 1.5700 ** .60162 0.013
∆ln gdp2
-0.042670* .021652 0.057
dummy 0.0052416 .067921 0.939
𝐸𝐶𝑀𝑡−1 -0.60831*** .12515 0.000
Diagnostic tests
Test F-statistic Prob. value
0.447
0.361
0.028
0.679
𝜒2
𝑆𝐸𝑅𝐼𝐴𝐿 0.59270
𝜒2
𝐴𝑅𝐶𝐻 0.85386
𝜒2
𝑊𝐻𝐼𝑇𝐸 7.1850
𝜒2
𝑅𝐸𝑀𝑆𝐴𝑌 0.17460
Notes: *** indicate significant at 1% level, ** 5% and * 10% level of significant.
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Table 7 Non- Granger causality test
Variables ln govt ln gdp combine
ln govt ……….. 26.48376 ( 0.0000)*** 40.12040 ( 0.0000)***
ln gdp 0.636338
(0.7275)
………… 2.074147
(0.7221)
*** indicate 1% significant level and values in parenthesis are the P-value.
Based on the unit root test and optimal lag selection results, the maximum lags (l) chosen for non-
causality test is 2 i.e. (𝑙 = 𝑑 𝑚𝑎𝑥 + 𝑘 ≤ 2). As shown in Table 7 above, the result indicates a unidirectional
causality running from GDP to government expenditure. This implies that government expenditure is an
outcome of economic activities, which supports Wagner’s hypothesis. These findings is consistence with the
works ofPahlavani et al. (2011), Akpan (2011), Alimi (2013), Srinivasan (2013) in Iran, Nigeria and India
respectively.
V. Concluding remarks
This study attempted to revisit the Wagner’s law by using modern time-series econometric techniques
in Nigerian context from 1972-2011. Furthermore, the study includes the square of GDP to validate Wagner’s
claim that increase in economic activities is the cause of government spending. Based on the empirical findings
of this study, the presence of Wagner’s Lawwas found to be valid. However, increase in GDP (i.e. the square of
GDP) has negative impact on government expenditure. This implies that, increase in economic activities has a
positive impact on government expenditure to a certain limit from which any additional increase will not
increase government spending as proved by the negative coefficient of the square of GDP. Based on the
empirical findings of this study, we found new evidence that has not been explored in the context of Nigeria. As
such, the government needs to provide enabling environment for small and medium enterprises at all levels of
government in order to boost the economic activities in the country, which in turn reduces government
expenditure in the long run.
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