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2015•Unpublished venueRequires access

ESTIMATING THE IMPACT OF THE COMPONENTS OF PUBLIC EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA (A BOUND TESTING APPROACH)

I Ogbuagu Matthew, I Ekpenyong Udom

Open publisher page 3 citations

Abstract

The ever increasing presence of the Nigerian government in economic activities (reflected on the astronomical increase in government expenditure) calls for a reassessment of the impact of public expenditure on economic growth. This paper attempts to measure the short-run and longrun impacts of government recurrent expenditure and capital expenditure on economic growth. Using data from 1970-2014, we estimated the relationship with an Autoregressive Distributed Lag (ARDL) Model or “Bound Testing Approach” to cointegration. The most parsimonious model shows that recurrent expenditure has a positive and long-run impact on GDP. Surprisingly, the short-run coefficient of capital expenditure was negative and this effect dies out in the long-run. Also, the Toda-Yamamoto causality test shows a unidirectional causality emanating from GDP

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What this paper is about

The ever increasing presence of the Nigerian government in economic activities (reflected on the astronomical increase in government expenditure) calls for a reassessment of the impact of public expenditure on economic growth. This paper attempts to measure the short-run and longrun impacts of government recurrent expenditure and capital expenditure on economic growth. Using data from 1970-2014, we estimated the relationship with an Autoregressive Distributed Lag (ARDL) Model or “Bound Testing Approach” to cointegration. The most parsimonious model shows that recurrent expenditure has a positive and long-run impact on GDP. Surprisingly, the short-run coefficient of capital expenditure was negative and this effect dies out in the long-run. Also, the Toda-Yamamoto causality test shows a unidirectional causality emanating from GDP

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Available abstract

The ever increasing presence of the Nigerian government in economic activities (reflected on the astronomical increase in government expenditure) calls for a reassessment of the impact of public expenditure on economic growth. This paper attempts to measure the short-run and longrun impacts of government recurrent expenditure and capital expenditure on economic growth. Using data from 1970-2014, we estimated the relationship with an Autoregressive Distributed Lag (ARDL) Model or “Bound Testing Approach” to cointegration. The most parsimonious model shows that recurrent expenditure has a positive and long-run impact on GDP. Surprisingly, the short-run coefficient of capital expenditure was negative and this effect dies out in the long-run. Also, the Toda-Yamamoto causality test shows a unidirectional causality emanating from GDP

Key concepts: Distributed lag, Economics, Cointegration, Capital expenditure, Causality (physics), Government expenditure, Public expenditure, Public capital

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ESTIMATING THE IMPACT OF THE COMPONENTS OF PUBLIC EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA (A BOUND TESTING APPROACH) — Research Paper | ScholarLens