The Revenue-Expenditure Nexus in Nigeria: Assymetric Cointegration Approach

Olumuyiwa Ganiyu Yinusa, Olalekan Aworinde () and Isiaq Oseni
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Olumuyiwa Ganiyu Yinusa: Olabisi Onabanjo University, Ogun State, Nigeria

South-Eastern Europe Journal of Economics, 2017, vol. 15, issue 1, 47-61

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.

Keywords: State Revenue; State Expenditure; Asymmetric Cointegration; Threshold Autoregressive (TAR); Momentum-Threshold Autoregressive (M-TAR) (search for similar items in EconPapers)
JEL-codes: C22 C52 E62 H71 H72 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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