Effect of Government Expenditures on Economic Growth in Nigeria
European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 3, No.9, 2011
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Government Expenditure and Economic Development: Empirical Evidence from Nigeria
Muritala Taiwo Department of Economics and Financial Studies, Fountain University Osogbo, Nigeria Corresponding Author’s E-mail: muritaiwo@yahoo.com Tel: +2348034730332; +2347054979206 Taiwo Abayomi Department of Economics, Tai Solarin University of Education, Ijebu-Ode, Nigeria E-mail: yommy246@yahoo.com Tel: +2348055821802 Abstract This study attempts to empirically examine the trends as well as effects of government spending on the growth rates of real GDP in Nigeria over the last decades (1970-2008) using econometrics model with Ordinary Least Square (OLS) technique. The paper test for presence of stationary between the variables using Durbin Watson unit root test. The result reveals absence of serial correlation and that all variables incorporated in the model were non-stationary at their levels. In an attempt to establish long-run relationship between public expenditure and economic growth, the result reveals that the variables are co integrated at 5% and 10% critical level. The findings show that there that there is a positive relationship between real GDP as against the recurrent and capital expenditure. It could therefore be recommended that government should promote efficiency in the allocation of development resources through emphasis on private sector participation and privatization\commercialization. Keywords: Current expenditure; capital expenditure; macroeconomics; economic development 1. Introduction 1.1 Background of the Study The recent revival of interest in growth theory has also revived interest among researchers in verifying and understanding the linkages between government spending and economic growth especially in developing country like Nigeria. Over the past decades, the public sector spending has been increasing in geometric term
www.iiste.org
Government Expenditure and Economic Development: Empirical Evidence from Nigeria
Muritala Taiwo Department of Economics and Financial Studies, Fountain University Osogbo, Nigeria Corresponding Author’s E-mail: muritaiwo@yahoo.com Tel: +2348034730332; +2347054979206 Taiwo Abayomi Department of Economics, Tai Solarin University of Education, Ijebu-Ode, Nigeria E-mail: yommy246@yahoo.com Tel: +2348055821802 Abstract This study attempts to empirically examine the trends as well as effects of government spending on the growth rates of real GDP in Nigeria over the last decades (1970-2008) using econometrics model with Ordinary Least Square (OLS) technique. The paper test for presence of stationary between the variables using Durbin Watson unit root test. The result reveals absence of serial correlation and that all variables incorporated in the model were non-stationary at their levels. In an attempt to establish long-run relationship between public expenditure and economic growth, the result reveals that the variables are co integrated at 5% and 10% critical level. The findings show that there that there is a positive relationship between real GDP as against the recurrent and capital expenditure. It could therefore be recommended that government should promote efficiency in the allocation of development resources through emphasis on private sector participation and privatization\commercialization. Keywords: Current expenditure; capital expenditure; macroeconomics; economic development 1. Introduction 1.1 Background of the Study The recent revival of interest in growth theory has also revived interest among researchers in verifying and understanding the linkages between government spending and economic growth especially in developing country like Nigeria. Over the past decades, the public sector spending has been increasing in geometric term
References: Azerbaijan: International Monetary Fund (IMF) working paper. WP/08/115. Bakare I.A.O (2003), “Fundamental and Practice of Marcoeconomics” Giitbbak publisher 25 | P a g e www.iiste.org European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 3, No.9, 2011 pp 26 | P a g e www.iiste.org European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 3, No.9, 2011 27 | P a g e www.iiste.org European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 3, No.9, 2011