scholarly journals THE CROWDING-OUT EFFECT OF FISCAL POLICY ON CAPITAL INFLOWS IN NIGERIA

2020 ◽  
pp. 043
Author(s):  
Abdurrauf Idowu Babalola ◽  
Saidat Oluwatoyin Onikosi-Alliyu
Keyword(s):  
Fiscal Policy ◽  
Budget Deficit ◽  
Negative Impact ◽  
Capital Inflows ◽  
Crowding Out ◽  
Explanatory Variables ◽  
Long Run ◽  
Significant Negative Impact ◽  
Short Run ◽  
The Government

The study investigated the effect of fiscal policy on crowding out capital inflows in Nigeria using annual data between 1970 and 2011 by using the foreign direct investment (FDI) as proxy to capital inflows represent the dependent variable, budget deficit (BD), foreign borrowing (FL) and domestic borrowing (DL) as proxies to fiscal policy are placed as explanatory variables. Cointegration and ECM technique were employed. Our finding showed that in both the short and long run, BD does not crowd out but rather crowd in FDI. In the short run, DL averagely has significant positive impact on FDI.  However, in the long run, DL has significant negative impact on FDI. More so, in both short run and long run period, FL has significant negative impact on FDI, therefore, FL crowds out FDI. The speed of adjustment back to equilibrium showed that the explanatory variables have capacity to adjust FDI significantly. The study recommends that the government could try to be aware of the implication of its fiscal policy in running a budget deficit and making proper decision in sourcing for funds to finance the deficit. Foreign borrowing is less expensive in financing budget deficit, so if the government must borrow, it should give preference to this source. Generally, the government should reduce deficit because of the implications inherent in it.

scholarly journals Effect of capital inflows on financial development in Ghana

2019 ◽  
Vol 7 (1) ◽  
pp. 85-102
Author(s):  
Daniel Agyapong ◽  
Michael Asiamah ◽  
Joop Lloyd Crabbe
Keyword(s):  
Financial Development ◽  
Negative Impact ◽  
External Debt ◽  
Financial Sector ◽  
Capital Inflows ◽  
Annual Data ◽  
Policy Makers ◽  
Long Run ◽  
Significant Negative Impact ◽  
Short Run

The study examines the effect of capital inflows on financial development in Ghana. The study employs the Johansen and Juselius multivariate cointegration approach in analysing the interactions between the variables using annual data spanning 1970 to 2014. The results show foreign direct investment (FDI), external debt, and remittance inflows have significant negative impact on financial development in the long run. Furthermore, there was significant negative relationships between external debt, remittance inflows, and financial development in the short run. However, the relationship between FDI and financial development in the short run was not significant. The study was only limited to Ghana. However, the study will help countries particularly developing countries in analysing inflows of capital and their effect on the development of financial sector for policy purposes. Furthermore, this study provides avenues for policy makers to properly formulate policies containing capital inflows for effective financial sector development. Also, the study will help policy makers in terms of how issues of capital flight must be addressed and how to take pragmatic steps to channel remittances inflows to productive sectors of the economy.

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 Foreign Direct Investment, External Debt, and Balance of Payment: A Causality Analysis for Bangladesh

2020 ◽  
Author(s):  
Muhammad Mahmud Mostafa
Keyword(s):  
Foreign Direct Investment ◽  
Granger Causality ◽  
Direct Investment ◽  
Negative Impact ◽  
External Debt ◽  
Causality Analysis ◽  
Causality Test ◽  
Long Run ◽  
Significant Negative Impact ◽  
Short Run

The purpose of this study is to analyze the causal relationship of external debt and balance of payment with foreign direct investment (FDI) in Bangladesh for the period of 1980 to 2017 through the application of Johansen Cointegration technique, Vector Error Correction Model (VECM), and Granger Causality approach. Results of cointegration and VECM indicate a significant long-run relationship between dependent (FDI) and independent variables (external debt and balance of payment). External debt is found to have a significant negative impact on FDI in the long-run, but it is found insignificant in the short-run. In contrast, the balance of payment has a significant positive effect on FDI both in the long-run and short-run. Results of the Granger causality test reveal that there exists bidirectional short-run causality between the balance of payment and FDI; that is, both the balance of payment and FDI affect each other. But no unidirectional or bidirectional short-run causality is found between external debt and FDI. Keywords: FDI, external debt, balance of payment, cointegration, VECM, causality

scholarly journals The Impact of Government Debt Issuance on Short-Term interest rates in Indonesia

2009 ◽  
Vol 11 (3) ◽  
pp. 301
Author(s):  
Sri Adiningsih
Keyword(s):  
Fiscal Policy ◽  
Private Sector ◽  
Financial Markets ◽  
Interest Rates ◽  
Budget Deficit ◽  
Negative Impact ◽  
Government Debt ◽  
Crowding Out ◽  
Short Term ◽  
The Impact

This paper analyzes whether the expansionary fiscal policy funded by issuing debt instruments in financial markets will increase short-term interest rates. If  the expansionary fiscal policy increases interest rates, which decrease private spending especially investment, crowding out occurs. This is interesting because global economic crisis has encouraged many countries to run large budget deficits to stimulate the economy. Indonesia has also run budget deficit during this crisis and even in years before. The impact of such a policy can be significant because Indonesia’s debt market is still narrow and shallow. Therefore, its capability of absorbing the government debt instruments without influencing the private sector funding is limited. This study tests whether the crowding out occurs in Indonesia using a time series econometric model inspired by Cebula and Cuellar’s model. The Cointegration Regression and Error Correction Model (ECM) are used in this study. Monthly data from April 2000 to December 2008 are used for overnight real interbank call money interest rates, real net government bond issues in trading, real narrow money supply, real rate of one-month Certificate of Bank Indonesia, growth of Gross Domestic Product, and real net international capital flows. This empirical study shows that the crowding out problem occurred in Indonesia during the period. This indicates that financing budget deficit in Indonesia by issuing debt instruments in the financial markets has a negative impact on the private sector.

scholarly journals Analysis of the Impact of Fiscal Policy on Economic Growth in South Africa: VECM Approach

2018 ◽  
Vol 10 (2) ◽  
pp. 231
Author(s):  
Tshembhani Mackson HLONGWANE ◽  
Itumeleng Pleasure MONGALE ◽  
Lavisa TALA
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Fiscal Policy ◽  
Negative Impact ◽  
National Development ◽  
Real Gdp ◽  
Long Run ◽  
Fixed Capital Formation ◽  
The Government ◽  
The Impact

Fiscal policy ensures macroeconomic stability as a precondition for growth at the macro level. This study investigates the impact of fiscal policy on economic growth of South Africa from 1960 to 2014 through a Cointegrated Vector Autoregression approach. It seeks to contribute to the existing literature as well as in designing effective fiscal policy programmes which can propel economic performance. Theresults of the long run estimates revealed that government tax revenue has a positive and significant long run influence on economic growth, whereas the government gross fixed capital formation and budget deficit have a negative impact on real GDP. For that reason, the study recommends that some expansionary fiscal policy measures should be strengthened since they play a very important role in the economy so as to meet the government target of the National Development Plan Vision for 2030.

Public investment and inclusive growth in Africa

2020 ◽  
Vol 47 (12) ◽  
pp. 1669-1691
Author(s):  
Opeoluwa Adeniyi Adeosun ◽  
Philip Akanni Olomola ◽  
Adebayo Adedokun ◽  
Olumide Steven Ayodele
Keyword(s):  
Fiscal Policy ◽  
Public Investment ◽  
Inclusive Growth ◽  
Government Investment ◽  
Automatic Stabilization ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
The Government ◽  
Productive Employment

PurposeThe increasing debate on the viability of broad-based productive employment in stimulating the participatory tendencies of growth makes it instructive to inquire how the African “Big Five” have fared in their quests to ensure growth inclusiveness through public investment-led fiscal policy.Design/methodology/approachTime varying structures and nonlinearities in the government investment series are captured through the non-linear autoregressive distributed lag, asymmetric impulse responses and variance decomposition estimation techniques.FindingsStudy findings show that positive investment shocks stimulate growth inclusiveness by enabling access to opportunities through job creation and productive employment for the populace; this result is evident for Morocco and Algeria. However, there is a non-negligible evidence that shocks due to decline in the government investment manifest in insufficient capital stocks and limited investment opportunities, impede access to opportunities by the populace, hinder labour employability and make growth less inclusive. Furthermore, all short-run findings corroborate long-run results regarding the reaction of inclusive growth to positive investment shocks with the exclusion of South Africa; which, unlike its long-run finding, shows that shocks due to increases in investment can foster growth inclusiveness. Also, in respect to short-run negative investment shocks, Nigeria is the only country that does not align its long-run findings.Practical implicationsThat public investment shocks make or mar inclusive growth effectiveness shows the need for appropriate fiscal policy consolidation and automatic stabilization guidelines to ensure buffers against shocks and to enhance government investment generation efficiency for a sustainable inclusive growth process that is more participatory in Africa.Originality/valueThis study is the first to accommodate possibilities of shocks in the inclusivity of growth analysis for the five biggest African economies which jointly account for over half of the recorded growth in the continent. As such, there is quantitative evidence that government investment is a potent determinant of growth inclusiveness and it is susceptible to structural changes and time variation of shocks.

DOES FISCAL DEFICIT CROWD OUT PRIVATE CORPORATE SECTOR INVESTMENT IN INDIA?

2016 ◽  
Vol 64 (05) ◽  
pp. 1201-1224 ◽  
Author(s):  
RANJAN KUMAR MOHANTY
Keyword(s):  
Negative Impact ◽  
Investment Decision ◽  
Private Investment ◽  
Fiscal Deficit ◽  
Corporate Sector ◽  
Significant Negative Impact ◽  
Short Run ◽  
Financing Pattern ◽  
The Government ◽  
The Impact

This paper examines the impact of fiscal deficit and its financing pattern on private corporate sector investment in India, for the period from 1970–1971 to 2012–2013. Using Autoregressive Distributed Lag (ARDL) Models, the study finds that fiscal deficit crowds out private investment both in the long run and in the short run. The results also show that internal (domestic) financing of fiscal deficit has significant negative impact on private investment but external (foreign) financing of fiscal deficit has insignificant effect. In the short run, availability of bank credit plays a more important role in investment decision making than the rate of interest in India. The study suggests that government should maintain the fiscal deficit within a sustainable level by reducing its unnecessary non-developmental expenditure, subsidies etc. The government should restructure its financing pattern of fiscal deficit since internal financing has a significant negative impact on private investment.

scholarly journals Labor efficiency, government spending and productivity nexus based on panel ARDL approach: Evidence from selected European countries

2020 ◽  
Author(s):  
Wen Xuezhou ◽  
Rana Yassir Hussain ◽  
Haroon Hussain ◽  
Muhammad Saad ◽  
Sikandar Ali Qalati ◽  
...  
Keyword(s):  
Government Spending ◽  
Negative Impact ◽  
Human Life ◽  
Government Expenditure ◽  
European Countries ◽  
Panel Ardl ◽  
Long Run ◽  
Ardl Approach ◽  
Significant Negative Impact ◽  
The Government

Abstract The current study advocates the role of efficient labor, average gross earnings per person, government spending, and quality of human life in defining the productivity of thirteen European countries. This study applied panel ARDL approach for data period ranging from 2001 to 2016. The results, in the long run, suggested that more efficient labor, increased gross earnings, and higher HDI causes higher productivity in the selected European countries. However, the results for the gross earnings were positive but insignificant. Government spending and inflation had a significant negative impact on productivity. These results suggest to keep inflation in check and limit the government expenditure to human development and to the productive uses in the selected countries.

Displacement from Protected Areas and its implications for conservation and livelihoods-The case of Kuno Wildlife Sanctuary, Madhya Pradesh

Social Change ◽  
2003 ◽  
Vol 33 (2-3) ◽  
pp. 89-114 ◽  
Author(s):  
Arpan Sharma
Keyword(s):  
Protected Areas ◽  
Wildlife Conservation ◽  
Negative Impact ◽  
Madhya Pradesh ◽  
Wildlife Sanctuary ◽  
Important Lesson ◽  
The People ◽  
Long Run ◽  
Significant Negative Impact ◽  
Short Run

The designation of Protected Areas (PAs) for biodiversity conservation has had negative implications for communities that derive their sustenance from such areas. Apart from restrictions on resource use, there have also been instances of people being displaced from areas that they had inhabited and that had been designated subsequently as PAs. Movements for greater justice and rights of marginal communities, have been iing the destitution that displacement wreaks on communities, particularly tribals. The present paper describes in detail, an ongoing resettlement and rehabilitation (R&R) exercise from the Kuno Wildlife Sanctuary in Madhya Pradesh in terms of the rehabilitation package offered and the process of R&R. It also discusses the impacts that the displacement has had on the lives of the community in question. Finally, the implications of such relocation attempts for wildlife conservation are discussed. While the rehabilitation package offered in the case of Kuno Wildlife Sanctuary, as well as the overall attitude of the agency that carried out the relocation, seems to have been a significant improvement over previously recorded instances of such exercises, it emerges that displacement has nevertheless had a significant negative impact on the livelihood of the people, at least in the short run. So far, the R&R exercise has been unsatisfactory with respect to several aspects such as identification of suitable land for resettlement, comprehensive inclusion of beneficiary families, assistance to tide over uncertain agricultural output and incomes during the relocation period, provision of alternatives to fodder and non-timber forest resources previously available from forests and creation of communications and road networks for resettled villages. It would require sustained investments by government and non-government agencies, in the medium to long run, for the displaced community to be able to reconstruct livelihoods and regain socio-economic levels that prevailed inside the sanctuary. An important lesson emerging from the Kuno experience is that trauma to the community could be mitigated if the implementing agency concentrates right from the start on genuine mobilisation, and investment in building the community's capacity to deal with the drastic changes that displacement entails.

scholarly journals The impact of budgetary and political institutions on fiscal cyclicality: Evidence from Egypt

2021 ◽  
Vol 10 (3) ◽  
pp. 72-84
Author(s):  
Sarah El-Khishin ◽  
Mohamed Zaky
Keyword(s):  
Fiscal Policy ◽  
Political Institutions ◽  
Negative Impact ◽  
Golden Rule ◽  
Electoral System ◽  
Impulse Response Functions ◽  
Long Run ◽  
The Government ◽  
New Variables ◽  
The Impact

We investigate the cyclicality of fiscal policy in Egypt during the period of 1976–2019 with a focus on how budgetary and political institutions affect fiscal performance during economic cycles. We define new variables for budgetary and political institutions and incorporate them in a vector error correction model (VECM) and impulse response functions (IRFs) analysis. While current and capital spending are proven to behave procyclically, revenues respond countercyclically during business cycles. Poor political and budgetary institutions have a negative impact on the primary deficit in a way that led to procyclical behaviour in fiscal policy in the long run. We recommend reinforcing the Golden Rule and changing the nature of the electoral system to a party-based to strengthen the role of parliament in keeping the government accountable

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