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Macroeconomic Variables and the Dynamic Effect of Public Expenditure: Long-term Trend Analysis in Nigeria

Author

Listed:
  • Ajibola Arewa

    (Lagos State University, Faculty of Management Sciences, Department of Accounting and Finance)

  • Prince C. Nwakahma

    (University of Port-Harcourt, Faculty of Management Sciences, Department of Finance and Banking)

Abstract

The paper investigates the long-run relationship between government expenditures and a set of macroeconomic variables (GDP, consumer price index and unemployment) using annual data collected from CBN statistical bulletin for a period of 19891 to 2011. It particularly adopts Johansen multivariate co integration for its estimation procedure and discovers that there is long-run relationship between government expenditure and the specified macroeconomic variables. It also discovers that an increase in capital expenditure improves economic bliss, while recurrent expenditure is detrimental to growth. Finally, our findings show that most of the variables do not Granger cause each other, but however, recurrent expenditure Granger causes prices, in the same veil capital expenditure does granger cause unemployment

Suggested Citation

  • Ajibola Arewa & Prince C. Nwakahma, 2013. "Macroeconomic Variables and the Dynamic Effect of Public Expenditure: Long-term Trend Analysis in Nigeria," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(6), pages 1-2, December.
    • Handle: RePEc:spp:jkmeit:1414
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    References listed on IDEAS

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    1. Folster, Stefan & Henrekson, Magnus, 2001. "Growth effects of government expenditure and taxation in rich countries," European Economic Review, Elsevier, vol. 45(8), pages 1501-1520, August.
    2. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    3. 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.
    4. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    5. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 645-661.
    6. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
    7. Arusha Cooray, 2009. "Government Expenditure, Governance and Economic Growth," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 51(3), pages 401-418, September.
    8. Holmes, James M & Hutton, Patricia A, 1990. "On the Causal Relationship between Government Expenditures and National Income," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 87-95, February.
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    Cited by:

    1. Iyabo A. Olanrele, 2020. "Dynamic Effect of Public Expenditure on Oil Producing Economy: An Empirical Evidence from Nigeria," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 7(1), pages 64-73.
    2. Irene Olanma Onwuemeka & Uche Collins Nwogwugwu & Emmanuel Onwuka, 2022. "Impact of Infrastructure Investment on Economic Growth in Nigeria: An Autoregressive Distributed Lag Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(1), pages 288-298, January.
    3. Samir Ul Hassan & Biswhambhara Mishra, 2017. "Economic and Political determinants of government expenditure in the state of Jammu and Kashmir (India): A multivariate co-integration analysis," 2017 Papers pha1196, Job Market Papers.

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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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