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The tax-spend nexus in Nigeria: evidence from asymmetric modeling

Author

Listed:
  • Olalekan Bashir Aworinde*

    (University of Bath, UK)

  • Mushay Adeniyi Ogundipe

    (Tai Solarin University of Education, Nigeria)

Abstract

This paper examines the relationship government expenditures and revenues in Nigeria by reposing the implicit assumption of a symmetric adjustment process underlying the standard cointegration and error correction model. The study estimates an asymmetric error correction model using the momentum threshold autoregression framework over the period 1961-2012. First, the results suggest that revenues and expenditures are cointegrated and that the adjustment process of the budgetary disequilibrium is asymmetric. Second, in the short-run there is evidence of a bi-directional causal relationship between government revenues and expenditures. Third, the long-run results show that revenues and expenditures respond to budgetary disequilibrium. The asymmetric adjustment reveals that revenues respond only to a worsening budget, and government expenditure respond to a worsening budget than for an improving budget.

Suggested Citation

  • Olalekan Bashir Aworinde* & Mushay Adeniyi Ogundipe, 2015. "The tax-spend nexus in Nigeria: evidence from asymmetric modeling," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(1), pages 39-51, January-M.
    • Handle: RePEc:jda:journl:vol.49:year:2015:issue1:pp:39-51
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    Citations

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    Cited by:

    1. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    2. Engy Raouf, 2021. "Oil Prices Shocks and Government Expenditure," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 78-84.
    3. 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.
    4. Ntokozo Patrick Nzimande & Harold Ngalawa, 2022. "Tax-Spend or Spend-Tax? The Case of Southern Africa," Economies, MDPI, vol. 10(4), pages 1-10, April.

    More about this item

    Keywords

    Expenditure; Revenue; Asymmetries; Fiscal deficits;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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