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

Olalekan Aworinde () and Mushay Adeniyi Ogundipe
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Mushay Adeniyi Ogundipe: Tai Solarin University of Education, Nigeria

Journal of Developing Areas, 2015, vol. 49, issue 1, 39-51

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.

Keywords: Expenditure; Revenue; Asymmetries; Fiscal deficits (search for similar items in EconPapers)
JEL-codes: C22 E62 H6 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.49:year:2015:issue1:pp:39-51

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