Deficit financing approaches and the Nigerian sector’s output

2021 ◽  
Vol 6 ◽  
pp. 194-211
Author(s):  
Osuji Casmir Chinemerem ◽  
Erhijakpor Andrew E.O ◽  
Oshiobugie Omolegie Bruno
Keyword(s):  
Budget Deficit ◽  
Manufacturing Sector ◽  
Foreign Debt ◽  
Mixed Effect ◽  
Foreign Reserve ◽  
Services Sector ◽  
Insignificant Effect ◽  
Domestic Debt ◽  
Deficit Financing ◽  
Short Run

This study examined the effect of deficit financing on Sectorial Output in Nigeria from 1986–2020. The independent variable in the study is deficit financing measured by domestic debt, foreign debt, budget deficit, and Foreign exchange reserve while the dependent variable in the study is Sectorial Output measured by Manufacturing Sector and Services Sector Output.  Accordingly, the two models support the ARDL Methodology since they reported mixed integration. The study found that domestic debt has a positive significant effect on Sectorial Output in Nigeria. More so, Foreign Debt has a negative insignificant effect on Manufacturing Sector Output. However, it has a significant effect on the Services Sector Output in Nigeria. Again, the study found that Budget Deficit exerted a positive significant effect on Manufacturing Sector Output. However, it exerted a negative insignificant effect on Services Sector Output. While Foreign Reserve exerted a negative insignificant effect on Manufacturing Sector Output, Foreign Reserve had mixed effects on Services Sector Output; such effect tends to be statistically significant only in the short run. Lastly, the both inflation rate and the interest rate have a mixed effect on Sectorial Output.

scholarly journals Pembiayaan Defisit dengan Utang dan Ketahanan Fiskal di Indonesia

The Winners ◽  
2013 ◽  
Vol 14 (2) ◽  
pp. 127
Author(s):  
La Ode Suriadi
Keyword(s):  
Foreign Debt ◽  
Ordinary Least Squares ◽  
Multiple Regression Model ◽  
Fiscal Sustainability ◽  
Debt Ratio ◽  
The World Bank ◽  
Domestic Debt ◽  
Deficit Financing ◽  
The Republic ◽  
Primary Surplus

The focus of this study is to analyze the fiscal sustainability in Indonesia. To achieve these objectives, multiple regression model was constructed by the method of ordinary least squares (OLS). This model modified of the model of Buiter, Cudington, and Din. H.T. Data were collected from various sources such as the World Bank, Asian Development Bank, Bank of Indonesia, the Ministry of Finance of the Republic of Indonesia and the Indonesian Central Bureau of Statistics. The data are in the form of time series from 1980 - 2011. The results indicated that the budget deficit financing via debt (both foreign debt and domestic debt) still maintaining fiscal sustainability. This indication is seen from the change in value of the primary surplus that causes the debt ratio has decreased. Besides debt financing (both foreign debt and domestic debt) does not significantly causes the debt ratio increases.

scholarly journals THE EFFECT OF MACROECONOMIC VARIABLES ON FISCAL SUSTAINABILITY IN INDONESIA, PERIOD 2004Q1-2018Q4

2020 ◽  
Vol 1 (2) ◽  
pp. 61
Author(s):  
Muhammad Latif Abdullah ◽  
FNU Sunaryati
Keyword(s):  
Budget Deficit ◽  
Foreign Debt ◽  
Fiscal Sustainability ◽  
Series Data ◽  
Government Budget ◽  
Macroeconomic Variables ◽  
Domestic Debt ◽  
The Government ◽  
The Impact ◽  
Government Budget Deficit

Abstract Fiscal sustainability illustrates the condition of a healthy government budget which can finance government spending without increasing debt supply. The purpose of this study is to analyze the impact of macroeconomic variables on fiscal sustainability which in this study fiscal sustainability is proxied as a government budget deficit. The data used in this study is the 2004Q1-2018Q4 time series data using the Vector Error Correction Model (VECM). The results showed that fiscal conditions in Indonesia are sustainable and macroeconomic variables such as domestic debt andinflation has a positive effect on increasing the government budget deficit. Whereas the variable state revenues and foreign debt negatively affect the government budget deficit.Keywords : Fiscal Sustainability, Government Budget Deficit, Domestic Debt, Foreign Debt.

scholarly journals Tax-financing of Budget Deficits in LDCs: Re-validation of Laffer Curve Theory

2017 ◽  
Vol 4 (3) ◽  
pp. 89
Author(s):  
Samuel O. Okafor ◽  
Olisaemeka D. Maduka ◽  
Ann N. Ike ◽  
Benedict I. Uzoechina
Keyword(s):  
Capital Investment ◽  
Budget Deficit ◽  
Developing Economies ◽  
Value Added ◽  
Private Investment ◽  
Education Expenditure ◽  
Laffer Curve ◽  
Deficit Financing ◽  
Short Run ◽  
Curve Theory

Urgent need for quick action to put Nigeria and other developing economies back to the path of economic recovery has almost imposed state of emergency on these economies. Most LDCs are faced with acute shortage of development funds due to recessions accompanying incessant crashes in international financial market. Raising existing tax rates to finance budget deficit in LDCs often generates public debate on pros and cons of such policy option. Study considered Nigeria as typical case of LDCs. Study focused on establishing the effectiveness of tax-financing of budget deficit under Laffer curve theory. Study spanned across 1970-2015. Data were analyzed using ADF, CUSUM, heteroskedasticity, multiple regression, Johansen cointegration and ECM. Results indicate that: (1) Custom and exercise duties, petroleum profit tax and value-added tax contributed significantly to the reduction in budget deficit while company income tax had nonsignificant impact(2)Total government revenue constituted major chunk of planned income for budget deficit financing(3) Deficit financing of capital health expenditure yielded high returns while that of recurrent education expenditure and capital education expenditure was accompanied by low returns (4)Growth and employment generation accelerated deficit financing while private investment decelerated it (5) There were long and short-run relationships among budget deficit, taxes, human capital investment and macroeconomic indicators with significant rate of adjustment of short-run disequilibrium. Study concluded that tax-financing of budget deficit was effective under Laffer curve effect. It was recommended, among others, that LDCs should enlarge their tax bases through inclusion, to finance budget deficit.

Effect of Deficit Financing on Economic Growth in Bangladesh: Cointegration and VECM Approach

2021 ◽  
pp. 231971452110573
Author(s):  
Md Mahbub Alam ◽  
Md Nazmus Sadekin ◽  
Rabiul Islam ◽  
Syed Moudud-Ul-Huq
Keyword(s):  
Economic Growth ◽  
Budget Deficit ◽  
External Debt ◽  
Granger Causality Test ◽  
Cointegration Test ◽  
Causality Test ◽  
Long Run ◽  
Deficit Financing ◽  
Short Run ◽  
Causal Nexus

Bangladesh has been encountering a budget deficit since 1972 because of a decrease in the source of income. This paper aims to examine the effect of budget deficit financing on economic growth in Bangladesh throughout 1981–2018. Using secondary data, the paper uses the cointegration test, vector error correction mechanism (VECM) and Granger causality test. Johansen’s cointegration test outcomes find that the study variables are cointegrated and subsequently have a long-run nexus among the variables. The study finds that in the long run, government domestic debt (GDD), government external debt (GEXD) and money supply (MS) affect positively economic growth (RGDP). The outcomes of the VECM approach express that in the short run, GDD, external debt and MS negatively affect economic growth. Also, short-run causality runs from the GDD, GEXD and MS to economic growth. The Granger causality test result shows unidirectional causal nexus running from GDD to RGDP, RGDP to external debt and GEXD to MS, and bidirectional causal nexus between MS and GDD in Bangladesh. The study suggests the governments should enhance moderate levels of domestic and external borrowing and uses it in productive and efficient ways to accelerate economic growth in Bangladesh.

Determinants of Inflation in Vietnam: A VECM Approach

2015 ◽  
Vol 22 (04) ◽  
pp. 26-50
Author(s):  
Ngoc Tran Thi Bich ◽  
Huong Pham Hoang Cam
Keyword(s):  
Interest Rate ◽  
Crude Oil ◽  
Error Correction ◽  
Budget Deficit ◽  
Oil Prices ◽  
Crude Oil Prices ◽  
Domestic Credit ◽  
Short Run ◽  
The Impact

This paper aims to examine the main determinants of inflation in Vietnam during the period from 2002Q1 to 2013Q2. The cointegration theory and the Vector Error Correction Model (VECM) approach are used to examine the impact of domestic credit, interest rate, budget deficit, and crude oil prices on inflation in both long and short terms. The results show that while there are long-term relations among inflation and the others, such factors as oil prices, domestic credit, and interest rate, in the short run, have no impact on fluctuations of inflation. Particularly, the budget deficit itself actually has a short-run impact, but its level is fundamentally weak. The cause of the current inflation is mainly due to public's expectations of the inflation in the last period. Although the error correction, from the long-run relationship, has affected inflation in the short run, the coefficient is small and insignificant. In other words, it means that the speed of the adjustment is very low or near zero. This also implies that once the relationship among inflation, domestic credit, interest rate, budget deficit, and crude oil prices deviate from the long-term trend, it will take the economy a lot of time to return to the equilibrium state.

How Does Public Debt Affect the Indian Macroeconomy? A Structural VAR Approach

2020 ◽  
Vol 14 (3) ◽  
pp. 253-284
Author(s):  
Ranjan Kumar Mohanty ◽  
Sidheswar Panda
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Public Debt ◽  
Positive Impact ◽  
Decomposition Analysis ◽  
Structural Var ◽  
Adverse Impact ◽  
Mixed Effect ◽  
Domestic Debt ◽  
The Impact

The study investigates the macroeconomic effects of public debt in India during 1980–2017 using a structural vector autoregression framework. The objective is to examine the impact of public debt on the interest rate, investment, inflation and economic growth in India. The results of the impulse response functions show that public debt has an adverse impact on economic growth but a positive impact on the long-term interest rate in the short run and a mixed effect (both negative and positive) on investment and inflation. We also find that domestic debt has a more adverse impact on the economy than external debt. The estimated variance decomposition analysis finds that much of the variation in selected macro variables are explained by public debt and growth in India. This study suggests that public debt especially domestic debt should be controlled and channelled productively to have a favourable impact on the economy. JEL Classification: H63, O40, C40

Determinants of Budget Deficit in Nigeria

2021 ◽  
Vol 6 (1) ◽  
pp. 1
Author(s):  
Maimuna M Shehu ◽  
Ibrahim M Adamu
Keyword(s):  
Budget Deficit ◽  
Budget Deficits ◽  
Cointegrating Vector ◽  
Long Run ◽  
Johansen Cointegration ◽  
Short Run ◽  
Johansen Cointegration Test ◽  
The Government ◽  
One Year ◽  
High Level

This paper investigates the factors governing the determination of budget deficit in Nigeria from 1981q1 through 2016q4. Our methodology is based on Johansen cointegration and Vector Error Correction model (VECM) approach. The result from the Johansen cointegration test suggests one cointegrating vector, which indicates the existence of a long run cointegrating relationship. Evidence from the long run and short run parameters suggest that exchange rate, interest rate and one year lag of budget deficit are the major determinants of budget deficit. Therefore, to achieve a realistic fiscal surplus, the government should determine a high level of accountability in its fiscal operations. In addition, any fiscal surplus should be channeled into productive investments to diversify the economy and reduce the likelihood of potential budget deficits.

scholarly journals Analysis of the Keynesian Theory of Employment and Sectoral Job Creation: The Case of the South African Manufacturing Sector

2018 ◽  
Vol 18 (1) ◽  
pp. 123-143
Author(s):  
Thomas Habanabakize ◽  
Paul-Francois Muzindutsi
Keyword(s):  
South African ◽  
Manufacturing Sector ◽  
Job Creation ◽  
The South ◽  
Economic Sectors ◽  
Vector Autoregressive ◽  
Integration Approach ◽  
Long Run ◽  
Short Run ◽  
Investment Spending

Abstract The manufacturing sector is one of the backbones of the South African economy, and yet is one of the economic sectors facing challenges in job creation. This study analysed the long-run and short-run effects of aggregate expenditure components on job creation in the South African manufacturing sector. A Vector Autoregressive (VAR) with Johansen co-integration approach was used to analyse quarterly data from 1994 to 2015. The findings are that there is a long-run relationship between aggregate expenditure and job creation in the South African manufacturing sector, with government and investment spending being the major components of aggregate expenditure that create jobs in the South African manufacturing sector. Conversely, consumption spending destroys jobs in the manufacturing sector, while net exports have no significant effect on job creation. The short-run relationship between variables was not significant. Recommendations are that more effort should be put into investment spending, and government should spend more on investment than on consumption spending - in order to increase job creation in the manufacturing sector.

scholarly journals THE SUSTAINABILITY OF STATE BUDGET IN DEBT REPAYMENT

2011 ◽  
Vol 13 (4) ◽  
pp. 415-434
Author(s):  
Haryo Kuncoro
Keyword(s):  
Data Analysis ◽  
Central Government ◽  
Foreign Debt ◽  
Theoretical Background ◽  
Fiscal Sustainability ◽  
Government Budget ◽  
State Budget ◽  
Quarterly Data ◽  
Domestic Debt ◽  
The Government

This paper is designed to analyze the sustainability of the central government budget in the case of Indonesia over the period of 1999-2009. First, we explore the theoretical background of the fiscal sustainability. Second, we develop a model to capture some factors determining the fiscal sustainability. Unlike the previous studies, we use both domestic debt and foreign debt to assess the fiscal solvency. Finally, we estimate it empirically. Based on the quarterly data analysis, we concluded that the government budget is unsustainable. This is associated with domestic debt rather than foreign debt. They imply that the central government should manage the debts carefully including re-profile, re-schedule, and re-structure them in order to spread the excess burden in the future. Also, the fiscal risks should be calculated comprehensively in order to maintain solvency.Keywords: Domestic debt, Foreign debt, Fiscal sustainability, Primary balanceJEL Clasbsification: E62, H63

scholarly journals A Granger Causal Analysis of Tax-Spend Hypothesis: Evidence from Malaysia

2021 ◽  
Vol 124 ◽  
pp. 04002
Author(s):  
Hanana Khan ◽  
Maran Marimuthu ◽  
Fong-Woon Lai
Keyword(s):  
Unit Root ◽  
Budget Deficit ◽  
Time Series Data ◽  
Financial Burden ◽  
Causal Analysis ◽  
Government Expenditures ◽  
Series Data ◽  
Causality Analysis ◽  
Long Run ◽  
Short Run

In economics, the investigation of the association between government revenues (GR) and government expenditures (GE) remains an essential discussion because of its vital role in policy implication concerning the Budget deficit. This paper aims to conduct a causal analysis of these two fiscal variables (government revenue and expenditure) using financial time-series data covering the period from 1990 to 2019 of Malaysia. The analyses used the unit root, Johanson Cointegration, and the Vector Error Correction Model (VECM). Unit root test proposed tested variables are integrated at a level first. Johanson's cointegration test disclosed the fact that long-run relationships exist between the tested variable. Finally, Granger causality analysis reveals a one-way relation between government revenues and expenditures and this unidirectional association is from revenues to expenditures which indicates that in Malaysia, expenditures are supported by revenues; in other words, the Tax-spend hypothesis is supported. In VECM short-run analysis, government revenues can affect government expenditures significantly and 11% disequilibrium can be corrected in the short-run. In short-run and long-run revenues are supporting expenditures. The study recommends that to avoid a high risk of economic problems like a fiscal illusion, unnecessary financial burden, and inflation policymakers should not be imposing a high tax rate to cut the budget deficit.

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