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The Revenue-Expenditure Nexus in Nigeria: Assymetric Cointegration Approach

Author

Listed:
  • Olumuyiwa Ganiyu Yinusa

    (Olabisi Onabanjo University, Ogun State, Nigeria)

  • Olalekan Bashir Aworinde

    (Tai Solarin University of Education, Ogun State, Nigeria)

  • Isiaq Olasunkanmi Oseni

    (Olabisi Onabanjo University, Ogun State, Nigeria)

Abstract

The study revisits the revenue-expenditure nexus in Nigeria using the asymmetric cointegration methods to study four hypotheses related to the revenue and ­expenditure nexus, namely: tax-spend, spend-tax, fiscal synchronisation and institutional separation hypotheses for state and FCT government in Nigeria, between 1981 and 2014, using the Asymmetric Cointegration Technique. Results show the following; first, the Engle-Granger, Gregory and Hansen (1996) and the Hatemi-J (2008) cointegration tests along with the cointegration tests associated with the TAR and MTAR models indicate there is a long-run equilibrium relationship between aggregate state and FCT government revenue and expenditures. Second, the M-TAR model provides evidence of asymmetries in the adjustment process towards budgetary equilibrium. Third, state and FCT government revenue has a statistically significant impact on state and local government expenditure in the short run, thus supporting the tax-spend hypothesis for the state and FCT government in Nigeria. In sum, the results obtained indicate that it was the state and FCT government revenue that was driving expenditure in Nigeria.

Suggested Citation

  • Olumuyiwa Ganiyu Yinusa & Olalekan Bashir Aworinde & Isiaq Olasunkanmi Oseni, 2017. "The Revenue-Expenditure Nexus in Nigeria: Assymetric Cointegration Approach," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 15(1), pages 47-61.
    • Handle: RePEc:seb:journl:v:15:y:2017:i:1:p:47-61
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    References listed on IDEAS

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    2. Taner TURAN & Mesut KARAKAŞ, 2018. "The Relationship between Government Spending and Revenue: Nonlinear Bounds Testing Approach (NARDL)," Sosyoekonomi Journal, Sosyoekonomi Society.

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    More about this item

    Keywords

    State Revenue; State Expenditure; Asymmetric Cointegration; Threshold Autoregressive (TAR); Momentum-Threshold Autoregressive (M-TAR);
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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