IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/97880.html
   My bibliography  Save this paper

Dynamic Nexus between Government Revenues and Expenditures in Nigeria: Evidence from Asymmetric Causality and Cointegration Methods

Author

Listed:
  • Aminu, Alarudeen
  • Raifu, Isiaka Akande

Abstract

The incessant fiscal deficit being experienced in different countries across the world has raised concerns about the ability of government to properly manage its revenues and expenditures. This has necessitated a flurry of studies on the relationship between government revenues and government expenditures over time. However, empirical evidence appears to be mixed, even within a country, depending on the methodological approaches adopted by each researcher. In the light of this, this study examines the asymmetric causality and cointegration between revenues and expenditures using aggregated and disaggregated data. The results of linear causality tests of Granger (1969) and Toda-Yamamoto (1995) support fiscal synchronisation hypothesis while those of nonlinear causality test of Diks and Panchenko (2006) support revenue-spending hypothesis. The results further show the existence of asymmetric cointegration between revenues and expenditures in the short-run and the long-run. The final results obtained from the decomposition of revenues into the positive and negative components show that positive change in revenues has a positive effect on expenditures and vice versa for a negative change in revenues. Based on these findings, the panacea proposed to over-reliance in revenues, particularly oil revenues as a determinant of government expenditures, is the proper management of oil revenues and other sources of revenues. The government would also need to diversify the economy so that more revenues could be available to it from other sources to finance its expenditures.

Suggested Citation

  • Aminu, Alarudeen & Raifu, Isiaka Akande, 2018. "Dynamic Nexus between Government Revenues and Expenditures in Nigeria: Evidence from Asymmetric Causality and Cointegration Methods," MPRA Paper 97880, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:97880
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/97880/1/MPRA_paper_97880.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-429, May.
    3. Balogun Abdulrasheed, 2017. "Causality between Government Expenditure and Government Revenue in Nigeria," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 4(2), pages 91-98.
    4. Bradley T. Ewing & James E. Payne & Mark A. Thompson & Omar M. Al-Zoubi, 2006. "Government Expenditures and Revenues: Evidence from Asymmetric Modeling," Southern Economic Journal, John Wiley & Sons, vol. 73(1), pages 190-200, July.
    5. Laurence Ball & N. Gregory Mankiw, 1995. "What do budget deficits do?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 95-119.
    6. Damian C. NWOSU & Harrison O. OKAFOR, 2014. "Government Revenue and Expenditure in Nigeria: A Disaggregated Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(7), pages 877-892, July.
    7. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    8. Bekiros, Stelios D. & Diks, Cees G.H., 2008. "The relationship between crude oil spot and futures prices: Cointegration, linear and nonlinear causality," Energy Economics, Elsevier, vol. 30(5), pages 2673-2685, September.
    9. Takumah, Wisdom, 2014. "The Dynamic Causal Relationship between Government Revenue and Government Expenditure Nexus in Ghana," MPRA Paper 58579, University Library of Munich, Germany.
    10. Balogun Abdulrasheed, 2017. "Causality between Government Expenditure and Government Revenue in Nigeria," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 4(2), pages 91-98.
    11. Tsangyao Chang & Gengnan Chiang, 2009. "Revisiting the Government Revenue-Expenditure Nexus: Evidence from 15 OECD Countries Based on the Panel Data Approach," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(2), pages 165-172, June.
    12. Diks, Cees & Panchenko, Valentyn, 2006. "A new statistic and practical guidelines for nonparametric Granger causality testing," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1647-1669.
    13. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    14. Matz Dahlberg & Eva Johansson, 1998. "The revenues-expenditures nexus: panel data evidence from Swedish municipalities," Applied Economics, Taylor & Francis Journals, vol. 30(10), pages 1379-1386.
    15. Damian C Nwosu & Harrison O Okafor, 2014. "Government Revenue and Expenditure in Nigeria: A Disaggregated Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(7), pages 877-892.
    16. Paresh Kumar Narayan & Seema Narayan, 2006. "Government revenue and government expenditure nexus: evidence from developing countries," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 285-291.
    17. Olalekan Bashir Aworinde, 2013. "The tax-spend nexus in Nigeria: Evidence from Nonlinear Causality," Economics Bulletin, AccessEcon, vol. 33(4), pages 3117-3130.
    18. Bernheim, B Douglas, 1989. "A Neoclassical Perspective on Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 55-72, Spring.
    Full references (including those not matched with items on IDEAS)

    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. 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. Hambeleleni Iiyambo & Teresia Kaulihowa, 2020. "An assessment of the relationship between public debt, government expenditure and revenue in Namibia," Public Sector Economics, Institute of Public Finance, vol. 44(3), pages 331-353.
    3. Xu Xiaojie, 2018. "Linear and Nonlinear Causality between Corn Cash and Futures Prices," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(2), pages 1-16, November.
    4. Aliyu Alhaji Jibrilla, 2016. "Fiscal sustainability in the presence of structural breaks: Does overconfidence on resource exports hurt government’s ability to finance debt? Evidence from Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1170317-117, December.
    5. Balogun Abdulrasheed, 2017. "Causality between Government Expenditure and Government Revenue in Nigeria," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 4(2), pages 91-98.
    6. Taner TURAN & Mesut KARAKAŞ, 2018. "The Relationship between Government Spending and Revenue: Nonlinear Bounds Testing Approach (NARDL)," Sosyoekonomi Journal, Sosyoekonomi Society.
    7. Alzahrani, Mohammed & Masih, Mansur & Al-Titi, Omar, 2014. "Linear and non-linear Granger causality between oil spot and futures prices: A wavelet based test," Journal of International Money and Finance, Elsevier, vol. 48(PA), pages 175-201.
    8. Xiaojie Xu, 2018. "Cointegration and price discovery in US corn cash and futures markets," Empirical Economics, Springer, vol. 55(4), pages 1889-1923, December.
    9. Fuad M.M Kreishan & Mohamed Sayed Abou Elseoud & Mohammad Selim, 2018. "Oil Revenue and State Budget Dynamic Relationship: Evidence from Bahrain," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 174-179.
    10. Douglas de Medeiros Franco, 2022. "Expectations, Economic Uncertainty, and Sentiment," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 26(5), pages 210029-2100.
    11. Pengfei Wang & Wei Zhang & Xiao Li & Dehua Shen, 2019. "Trading volume and return volatility of Bitcoin market: evidence for the sequential information arrival hypothesis," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(2), pages 377-418, June.
    12. De-Chih Liu, 2017. "The Discouraged Worker and Suicide in the United States," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(2), pages 771-787, November.
    13. Ullah, Nazim, 2016. "The relationship of government revenue and government expenditure: a case study of Malaysia," MPRA Paper 69123, University Library of Munich, Germany.
    14. Tea Kasradze, 2020. "Challenges Facing Financial Inclusion Due to the COVID-19 Pandemic," European Journal of Marketing and Economics Articles, Revistia Research and Publishing, vol. 3, ejme_v3_i.
    15. Michalis-Panayiotis Papafilis & Maria Psillaki & Dimitris Margaritis, 2019. "The Effect of the PSI in the Relationship Between Sovereign and Bank Credit Risk: Evidence from the Euro Area," Multinational Finance Journal, Multinational Finance Journal, vol. 23(3-4), pages 211-272, September.
    16. Oyeyinka OMOSHORO-JONES, 2020. "Investigating The Government Revenue–Expenditure Nexus: Empirical Evidence For The Free State Province In A Multivariate Model," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 11(2), pages 138-156.
    17. Dizaji, Sajjad Faraji, 2014. "The effects of oil shocks on government expenditures and government revenues nexus (with an application to Iran's sanctions)," Economic Modelling, Elsevier, vol. 40(C), pages 299-313.
    18. Bonaccolto, G. & Caporin, M. & Gupta, R., 2018. "The dynamic impact of uncertainty in causing and forecasting the distribution of oil returns and risk," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 507(C), pages 446-469.
    19. Wang, Chao & Kim, Yul-Seong & Kim, Chi Yeol, 2021. "Causality between logistics infrastructure and economic development in China," Transport Policy, Elsevier, vol. 100(C), pages 49-58.
    20. Gözde YILDIRIM, Zafer ADALI, 2018. "Linear and Non-Linear Causality Tests of Stock Price and Real Exchange Rate Interactions in Turkey," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 1.

    More about this item

    Keywords

    Government Revenues; Government Expenditures; Asymmetries; Causality; Cointegration;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:pra:mprapa:97880. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.