IDEAS home Printed from https://ideas.repec.org/a/hur/ijarbs/v7y2017i5p8-26.html
   My bibliography  Save this article

Government Expenditure and Economic Growth in Nigeria: An Analysis with Dynamic Ordinary Least Squares

Author

Listed:
  • Gilbert Deinde Ifarajimi
  • Kehinde Oluwole Ola

Abstract

This study investigates the impact of government expenditure on economic growth from 1981 to 2015 using Dynamic Ordinary Least Squares that incorporates endogenity in its estimation. The unit root test using Augmented Dickey Fuller revealed that all the series were stationary at first difference. The two-step Engle-Granger residual test showed that the residual was stationary at level; thus, there was a long run relationship among the series. The findings obtained from the long run Dynamic OLS showed that government expenditure on administration, government expenditure on economic services and nominal exchange rate were significant and had the expected signs except government expenditure on economic services. The empirical findings further indicated that the ECM was negative and statistically significant at 5%. The speed of adjustment was 71.38%. Lastly, in the short-run analysis, findings revealed that the nominal exchange rate was significant and had the expected sign. This might have been due to the influence of naira depreciation on government expenditure. The study therefore recommends that there is need for restructuring of government expenditure to be in line with macroeconomic objectives and also to reduce expenditure on transfers through economic diversification. Government should also take decisive steps to diversify the economy in order to reduce dependence on oil and to stabilize the value of naira.

Suggested Citation

  • Gilbert Deinde Ifarajimi & Kehinde Oluwole Ola, 2017. "Government Expenditure and Economic Growth in Nigeria: An Analysis with Dynamic Ordinary Least Squares," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(5), pages 8-26, May.
    • Handle: RePEc:hur:ijarbs:v:7:y:2017:i:5:p:8-26
    as

    Download full text from publisher

    File URL: http://hrmars.com/hrmars_papers/Government_Expenditure_and_Economic_Growth_in_Nigeria_An_Analysis_with_Dynamic_Ordinary_Least_Squares.pdf
    Download Restriction: no
    File URL: http://hrmars.com/hrmars_papers/Government_Expenditure_and_Economic_Growth_in_Nigeria_An_Analysis_with_Dynamic_Ordinary_Least_Squares.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Aladejare, Samson Adeniyi, 2013. "Government spending and economic growth: evidence from Nigeria," MPRA Paper 43916, University Library of Munich, Germany.
    2. Tajudeen Egbetunde Ismail O. Fasanya, 2013. "Public Expenditure and Economic Growth in Nigeria: Evidence from Auto-Regressive Distributed Lag Specification," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 16(1), pages 79-92, May.
    3. António Afonso & Juan Alegre, 2011. "Economic growth and budgetary components: a panel assessment for the EU," Empirical Economics, Springer, vol. 41(3), pages 703-723, December.
    4. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
    5. Kocherlakota, Narayana R & Yi, Kei-Mu, 1997. "Is There Endogenous Long-Run Growth? Evidence from the United States and the United Kingdom," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 235-262, May.
    6. Singh, Balvir & Sahni, Balbir S, 1984. "Causality between Public Expenditure and National Income," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 630-644, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Udi Joshua, 2019. "An ARDL Approach to the Government Expenditure and Economic Growth Nexus in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(3), pages 152-160, September.
    2. Yusuf Shamsuddeen Nadabo & Suleiman Maigari Salisu, 2021. "Investigating the Expenditure-Economic Growth Nexus in Nigeria the Presence of Structural Breaks: A Nonlinear ARDL Cointegration Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(09), pages 146-153, September.
    3. Michael A. Akume & Gylych Jelilov & Benedict Akanegbu, 2019. "The Impact of Military Spending on Economic Wellbeing in Nigeria," International Journal of Business, Economics and Management, Conscientia Beam, vol. 6(4), pages 186-200.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dimitrios Paparas & Christian Richter, 2015. "Fiscal policy and economic growth: Empirical evidence from the European Union," Working Papers 2015.06, International Network for Economic Research - INFER.
    2. S Tharshan & W L M A Liyanage & P G K Nilanka & E A Selvanathan & M Jayasinghe and S Selvanathan, 2019. "The Impact of Sectoral Government Expenditure on Economic Growth: Evidence from Sri Lanka," Discussion Papers in Economics economics:201902, Griffith University, Department of Accounting, Finance and Economics.
    3. Kalle Kukk, 2007. "Fiscal Policy Effects on Economic Growth: Short Run vs Long Run," Working Papers 167, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    4. Pula Lekë & Elshani Alban, 2018. "Role of Public Expenditure in Economic Growth: Econometric Evidence from Kosovo 2002–2015," Baltic Journal of Real Estate Economics and Construction Management, Sciendo, vol. 6(1), pages 74-87, June.
    5. Philip Arestis & Hüseyin Şen & Ayşe Kaya, 2021. "On the linkage between government expenditure and output: empirics of the Keynesian view versus Wagner’s law," Economic Change and Restructuring, Springer, vol. 54(2), pages 265-303, May.
    6. Islam, Muhammed N., 2015. "Economic growth, repression, and state expenditure in non-democratic regimes," European Journal of Political Economy, Elsevier, vol. 37(C), pages 68-85.
    7. Loizides, John & Vamvoukas, George, 2005. "Government Expenditure and Economic Growth: Evidence from Trivariate Causality Testing," Journal of Applied Economics, Universidad del CEMA, vol. 8(1), pages 1-28, May.
    8. Olayeni, Olaolu Richard, 2009. "A Bayesian analysis of government expenditure in Nigeria," MPRA Paper 18244, University Library of Munich, Germany.
    9. Odedoyin, Stephen, 2012. "Changing Fiscal Policy Actions, Economic Growth and Inflation in Nigeria, 1980-2009," MPRA Paper 94431, University Library of Munich, Germany, revised 20 Jul 2012.
    10. Ant Afonso & João Tovar Jalles, 2014. "Fiscal composition and long-term growth," Applied Economics, Taylor & Francis Journals, vol. 46(3), pages 349-358, January.
    11. Christine Simiyu, 2015. "Explaining the Relationship between Public Expenditure and Economic Growth in Kenya using Vector Error Correction Model (VECM)," Proceedings of International Academic Conferences 1003212, International Institute of Social and Economic Sciences.
    12. François Facchini & Mickael Melki, 2014. "Political Ideology And Economic Growth: Evidence From The French Democracy," Economic Inquiry, Western Economic Association International, vol. 52(4), pages 1408-1426, October.
    13. Nyasha Sheilla & Odhiambo Nicholas M., 2019. "The Impact of Public Expenditure on Economic Growth: A Review of International Literature," Folia Oeconomica Stetinensia, Sciendo, vol. 19(2), pages 81-101, December.
    14. Dong Fu & Lori L. Taylor & Mine K. Yücel, 2003. "Fiscal policy and growth," Working Papers 0301, Federal Reserve Bank of Dallas.
    15. Richard Kneller, 2000. "The Implications of the Comprehensive Spending Review for the Long-Run Growth Rate: a View From the Literature," National Institute Economic Review, National Institute of Economic and Social Research, vol. 171(1), pages 94-105, January.
    16. Arvin, Mak B. & Pradhan, Rudra P. & Nair, Mahendhiran S., 2021. "Are there links between institutional quality, government expenditure, tax revenue and economic growth? Evidence from low-income and lower middle-income countries," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 468-489.
    17. Kneller, Richard, 2000. "The Implications of the Comprehensive Spending Review for the Long-Run Growth Rate: a View From the Literature," National Institute Economic Review, National Institute of Economic and Social Research, vol. 171, pages 94-105, January.
    18. Dackehag, Margareta & Hansson, Åsa, 2015. "Taxation of Dividend Income and Economic Growth: The Case of Europe," Working Papers 2015:24, Lund University, Department of Economics.
    19. Nijkamp, Peter & Poot, Jacques, 2004. "Meta-analysis of the effect of fiscal policies on long-run growth," European Journal of Political Economy, Elsevier, vol. 20(1), pages 91-124, March.
    20. Cristian C. Popescu & Laura Diaconu (Maxim), 2021. "Government Spending and Economic Growth: A Cointegration Analysis on Romania," Sustainability, MDPI, vol. 13(12), pages 1-16, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hur:ijarbs:v:7:y:2017:i:5:p:8-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hassan Danial Aslam (email available below). General contact details of provider: http://hrmars.com/index.php/pages/detail/IJARBSS .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.