Fiscal Policy-Economic Growth Correlates: Further Evidence from Nigeria Economy

Damian J. Nwankwo, Chris U. Kalu and Mary O. Chiekezie

International Journal of Academic Research in Business and Social Sciences, 2017, vol. 7, issue 1, 1-11

Abstract: The study investigated the impact of fiscal policy on economic growth in Nigeria from the period of 1970 to 2014. The data used was sourced from Central Bank of Nigeria Statistical Bulletin of various issues and World Bank Development Indicator (WDI) and the Co-integration and Error Correction (ECM) approaches were utilized in analyzing the data. The result of the unit root test shows that government capital expenditure, oil revenue, gross domestic product and tax revenue are stationary at first difference I(1), while government recurrent expenditure is stationary at levels at levels I(0). The co-integration result shows that there are 3 co integrating equations at 5 per cent level of significance. This shows that there exist a long-run relationship between fiscal policy and economic growth. The estimated ECM has the required negative sign of -0.447 (45%) and lies within the accepted region of less than unity although, government capital and recurrent expenditures at lagged two years was found insignificant and therefore has no impact on economic growth. Based on the findings from the empirical analysis, the study recommends among others, the need for the Nigerian government to invest in productive investment through increase in capital expenditure over and above recurrent expenditure to stimulate economic growth.

Keywords: Fiscal policy; economic growth; co-integration; vector autoregressive; Nigeria (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:hur:ijarbs:v:7:y:2017:i:1:p:1-11

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