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 The Impact Of Budget Deficits On Macro-Economic Variables In The Nigerian Economy (1981 – 2012)

2014 ◽  
Vol 2 (11) ◽  
pp. 164-183
Author(s):  
B.O Osuka ◽  
Achinihu Joy Chioma
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Granger Causality ◽  
Budget Deficit ◽  
Nominal Exchange Rate ◽  
Budget Deficits ◽  
Economic Variables ◽  
Long Run ◽  
Johansen Cointegration Test ◽  
The Impact

This study examined the impact of budget deficits on macro-economic variables in the Nigerian economy for theperiod 1981-2012. This study sought to find out if there is a long-run relationship between budget deficits and other macro-economic variables in Nigeria. The study used the Augmented Dickey-Fuller (ADF) methods for finding out the presence of unit root in all variables and found that they are stationary at first differencing; they are 1(1). We also used Johansen Cointegration test to check for the cointegration of the variables and found that the variables in the study are all cointegrated of order one showing the presence of long-run relationship between budget deficits and our selected macro-economic variables ( GDP, interest rate, nominal exchange rate and inflation rate). The Granger Causality results reveal that there is a uni-directional Granger-causality between Budget deficits and GDP with GDP granger causing budget deficit. However, the test for causality showed that there exists no causality between deficits and interest rate, budget deficits and inflation and budget deficit and nominal exchange rate. We thereby concluded that budget deficits exert significant impact on the macro-economic performance of the Nigerian economy. The study recommend that since budget deficits could crowd-in investment through its reducing effects in interest rate, but emphasis should be placed on capital goods expenditure to make it have positive effect on GDP and thereby contribute to economic growth and development.

scholarly journals Do Budget Deficit Crowds Out Private Investment: A Case of Tanzanian Economy

2016 ◽  
Vol 11 (6) ◽  
pp. 183
Author(s):  
Samwel Mwigeka
Keyword(s):  
Budget Deficit ◽  
Private Investment ◽  
Annual Data ◽  
Budget Deficits ◽  
Vector Error Correction ◽  
Study Results ◽  
High Government ◽  
Johansen Cointegration Test ◽  
The Government ◽  
Private Investors

The existing high budget deficit in Tanzanian economy has created an immense concern among economic policy analysts. The study inspects whether budget deficits crowd out or crowd in private investment in Tanzania, using annual data for the period from 1970 to 2012. Using the Johansen cointegration test advocates there is at least one cointegration vector among these variables. Given such condition, the application vector error correction model (VEC) became inevitable as it presents additional and superior information in relation to other data production processes. The results indicate a close long–term connection between private investment, and other variables included in the study. Results suggest that budget deficits considerably crowds out private investment. The study advocates that government should readdress its fiscal policy that would support the private investors. The government should discourage high government expenditures and maintaining a low fiscal deficit also capital market should be used to finance budget deficit.

Fiscal Policy in Europe

2007 ◽  
Vol 201 ◽  
pp. 33-36 ◽  
Author(s):  
Ray J Barrell ◽  
Sylvia Gottschalk
Keyword(s):  
Budget Deficit ◽  
Stochastic Simulations ◽  
Forecast Errors ◽  
Budget Deficits ◽  
Government Budget ◽  
The Past ◽  
Large Numbers ◽  
The Difference ◽  
The Government ◽  
One Year

In the past twelve months the government budget situation in Germany has improved markedly, and the budget deficit has moved from 3.2 per cent of GDP in 2005 to 1.7 per cent in 2006, with further improvements in prospect. Over the same period in France, the budget deficit moved marginally from 3 per cent of GDP in 2005 to 2.5 per cent of GDP in 2006. The prospects for further improvement appear limited as the new government plans to cut taxes to stimulate the economy. Projections for budget deficits are very uncertain, as they are the difference between two large numbers (receipts and spending) that are difficult to predict accurately. Figures 1 and 2 plot the errors around our budget projections for France and Germany based on stochastic simulations on NiGEM. The 95 per cent confidence limit for our forecast one year ahead is around 1 per cent of GDP around our central forecast, and uncertainty increases into the future. As we can see from figures 3 and 4, our forecast errors for France and Germany have been well within the 95 per cent bands in the past three years, except for our one year ahead forecast for Germany for 2006. The budget improved by 1.5 per cent of GDP more than we had anticipated, and this appears to have been due to unexpectedly high tax receipts, rather than to changed policy.

scholarly journals The Effects of Primary Budget Deficits on Economic Growth: Evidence from Kenya

2021 ◽  
pp. 36-52
Author(s):  
Patrick Mugendi Mugo ◽  
Wafula Masai ◽  
Kennedy Osoro
Keyword(s):  
Economic Growth ◽  
Budget Deficit ◽  
Golden Rule ◽  
Cointegration Analysis ◽  
Gdp Per Capita ◽  
Budget Deficits ◽  
Long Run ◽  
Fixed Capital Formation ◽  
Short Run ◽  
Per Capita

Aims: The paper attempts to examine the effects of primary budget deficits on economic growth. It reviews the nature and direction of causality between primary budget deficit and economic growth. In the recent years, these have been debated both in developed and developing countries. In contributing to this ongoing debate, the study analyzes the case for Kenya from 1980 to 2016. The evidence is intended to provide policy insights for macroeconomic stability and sustained  economic growth for shared prosperity in Kenya. Study Design: The study employs quantitative time-series research design by utilizing Stata econometrics software. Place and Duration of Study: Sample: Evidence from Kenya, from 1980 to 2016. Methodology: The study employs unit root tests, Johansen cointegration analysis, a dynamic vector error correction model and a multivariate Toda-Yamamoto Granger-causality representation. Results: The findings establish that the primary budget deficit, gross fixed capital formation, real interest rate, terms of trade, inflation growth and financial innovation have significant effects on GDP per capita growth in Kenya. Primary budget deficit has a strong and significant effect on GDP per capita growth both in short-run and long run. In the short-run, the results revealed that the primary budget deficit had a positive effect on economic growth which turned negative in the long-run. There was a unidirectional causality running from primary budget deficit to economic growth.  Conclusion: The study concludes that both in the short run and long run, primary budget deficit has strong and significant causal effects on economic growth in Kenya. The evidence underscores the need for the authorities to reduce high primary budget deficits, interest payments and domestic borrowings and strictly apply the golden rule of public finances to boost long term inclusive growth, in Kenya. 

scholarly journals MODELLING VOLATILITY SPILLOVER BETWEEN CONVENTIONAL AND ISLAMIC STOCK INDEX IN MALAYSIA

2020 ◽  
Vol 10 (2) ◽  
pp. 26-32
Author(s):  
Edin Djedović ◽  
◽  
Ugur Ergun ◽  
Irfan Djedović ◽  
◽  
...  
Keyword(s):  
Garch Model ◽  
Stock Index ◽  
Cointegration Test ◽  
Volatility Spillover ◽  
Long Run ◽  
Johansen Cointegration ◽  
Short Run ◽  
Two Indices ◽  
Johansen Cointegration Test ◽  
The Relationship

This paper analyzes the vollatility spillover between the conventional index in Malaysia FTSE Malaysia KLCI (KLSE) and the Islamic index in Malaysia FTSE Bursa Malaysia Shariah Index (FTFBMHS). Monthly observations spanning in a period from 2002 to 2018 are obtained from investing.com database. GARCH model and Johansen cointegration test are used to investigate volatility spillover and the relationship between two indices. The results of the analysis indicate that in the short-run there is volatility spillover between FTSE Malaysia KLCI and FTSE Bursa Malaysia Shariah Index, while in the long-run there is no relationship between the two indices. The methodology of compiling Islamic indeces is based on Shariah law. Keywords: Conventional

scholarly journals Tax Revenue Productivity of Tax Reforms in Kenya

2021 ◽  
Vol 13 (12) ◽  
pp. 42
Author(s):  
James Murunga ◽  
Nelson W. Wawire ◽  
Moses K. Muriithi
Keyword(s):  
Fiscal Policy ◽  
Interest Rates ◽  
Tax Revenue ◽  
Budget Deficits ◽  
Tax Reforms ◽  
Tax System ◽  
Vector Error Correction ◽  
Long Run ◽  
Johansen Cointegration Test ◽  
The Government

Kenya has continued to experience increasing budget deficits. This is despite implementing various tax reforms. To finance the deficit, the Kenyan government should either raise more tax revenue or resort to borrowing. Domestic borrowing crowds out investment while external debt specifically non-concessional loans are tied to some unpopular conditions. The government has an option of considering non-concessional loans but this comes with a price of high interest rates and short payment periods. This means raising more tax with minimum burden is the best option. This study therefore seeks to investigate the responsiveness of Kenya’s tax system to GDP and Discretionary tax measures for the period between 1970 and 2018. Variables used in the study are integrated of order one. Johansen cointegration test reveals presence long run relationship thus informing the study to consider Vector Error Correction Model (VECM). The results reveal that Kenya’s tax system is inelastic but buoyant. This implies that the Kenyan tax system is unresponsive to GDP but responsive to discretionary tax measures. The finding of inelastic tax system has implications for the fiscal policy. The fiscal policy’s managers should target reducing or eliminating the tax exemptions, which might be eroding the effective tax base.

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 Relationship between Inflation and other Macro Economic Variables in Pakistan

2015 ◽  
Vol 2 (4) ◽  
pp. 6-15
Author(s):  
Adnan Ali ◽  
Farzand Ali Jan ◽  
Sami Ullah Khan
Keyword(s):  
Budget Deficit ◽  
Economic Resources ◽  
Var Model ◽  
Annual Data ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Government ◽  
The Relationship

Conventionally, it is claimed that persistently higher deficit in government budget may cause the inflation to rise in the long run but this relationship is not conclusive empirically. Therefore, the present study is aimed to determine the relationship between inflation and other studied variables of macroeconomic i.e. fiscal deficit and supply of money in the short run as well as in the long run in Pakistan. the bound testing approach to co-integration and VAR model, established within an autoregressive distributed lag (ARDL) is used to annual data of time series covering the period of time from 1960 to 2010 for examining the studied variables both in short run as well as in long run. The conclusion of the study shows that the relationship between the studied variables is insignificant in the long-run but the outcomes of VAR model illustrate that a short run positive relationship between the studied variables cannot be ignored. The study further indicates that 1% change in budget deficit and money supply caused to change the inflation by 0.29 and 0.31 times respectively in the short run. The results provide strong evidence that the government may target reducing the inflation by generating domestic economic resources to boost the economic growth instead of reducing budget deficit.

scholarly journals Inter-Sectorial Linkage of Economic Sectors and Their Contribution to Economic Growth: A Time Series Evidence from Ethiopia and China

2018 ◽  
Vol 5 (1) ◽  
pp. 25-32
Author(s):  
Abrham Tezera Gessesse ◽  
Zheng Xungang ◽  
He Ge
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Time Series Data ◽  
Least Square ◽  
Series Data ◽  
Economic Sectors ◽  
Long Run ◽  
Johansen Cointegration ◽  
Short Run ◽  
Johansen Cointegration Test

Purpose: The aim of this paper is to investigate the inter-sectorial linkage of economic sectors and their contribution to the economic growth using time series data from 1978-2014 and 1992-2014. Design/methodology/approach: This study employed a Johansen cointegration test and Ordinary Least Square (OLS) model. Findings: The Johansen cointegration and multiple regression results indicate that all economic sectors have strong, positive and significant long-run and short-run relationship with economic growth during the study period in both countries. The result revealed that MNF giant is an engine for Chinese economic growth while agriculture took the lion-share for Ethiopian economy. The MNF has bi-directional Granger cause with economic growth, agriculture and SRV for China, while GDP and AGR are the only bi-directional Granger causes variables for Ethiopia. Implications: Therefore, from a policy perspective, Ethiopian policymakers need to formulate agro-processing industries to ensure the transformation of the AGR to the MNF as well as maintain inter-sectorial linkage and sustain the country’s economic growth.  

Migration and US agricultural competitiveness

2013 ◽  
Vol 10 (2) ◽  
pp. 159-179 ◽  
Author(s):  
Philip L. Martin
Keyword(s):  
Farm Workers ◽  
Easy Access ◽  
Foreign Born ◽  
Guest Workers ◽  
Long Run ◽  
Short Run ◽  
Lower Wage ◽  
The Government ◽  
The One

Agriculture has one of the highest shares of foreign-born and unauthorized workers among US industries; over three-fourths of hired farm workers were born abroad, usually in Mexico, and over half of all farm workers are unauthorized. Farm employers are among the few to openly acknowledge their dependence on migrant and unauthorized workers, and they oppose efforts to reduce unauthorized migration unless the government legalizes currently illegal farm workers or provides easy access to legal guest workers. The effects of migrants on agricultural competitiveness are mixed. On the one hand, wages held down by migrants keep labour-intensive commodities competitive in the short run, but the fact that most labour-intensive commodities are shipped long distances means that long-run US competitiveness may be eroded as US farmers have fewer incentives to develop labour-saving and productivity-improving methods of farming and production in lower-wage countries expands.

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