EFFECTS OF PUBLIC EXPENDITURE ON SELECTED MACROECONOMIC VARIABLES IN NIGERIA; 1986 – 2012
EFFECTS OF PUBLIC EXPENDITURE ON SELECTED MACROECONOMIC VARIABLES IN NIGERIA; 1986 – 2012
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Date
2015-05
Authors
PETER, George Adagazu
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Abstract
The need to improve the welfare of Nigerian citizens via money spent by the government or public spending raises the need to evaluate the interaction and relationship between public expenditure and macroeconomic variables that determine the level of economic development in Nigeria. This study evaluates the effects of public expenditure on selected macroeconomic variables from 1986 – 2012. Public expenditure was disaggregated into two components; capital expenditure and recurrent expenditure, these were used as independent variables for each of the selected macroeconomic variables. Impulse Response Function from estimated Vector Error Correction model and Granger Causality test were used for analysis in the study. The findings showed that capital expenditure had positive impact on GDP growth rate and exchange rate, and negative impact on inflation and unemployment rate. On the other hand, recurrent expenditure had a positive impact on unemployment and exchange rate, and negative impact on inflation and GDP growth rate. The study concludes that though public expenditure is generally effective theoretically but it has some practical limitations that often undermine its effectiveness in Nigeria. Based on these findings, this study recommends that government should diversify and invest in the non – oil sector and focus on export driven commodities as this has the potential of increasing employment and output. Finally, that government should properly handle or manage capital expenditure and recurrent expenditure in order to control macroeconomic variables (inflation, unemployment, exchange rate and GDP) in a way that would ensure economic development in Nigeria.
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A THESIS SUBMITTED TO THE SCHOOL OF POSTGRADUATE STUDIES,
AHMADU BELLO UNIVERSITY, ZARIA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF A
MASTER OF SCIENCE DEGREE IN ECONOMICS.
DEPARTMENT OF ECONOMICS,
FACULTY OF SOCIAL SCIENCES
AHMADU BELLO UNIVERSITY, ZARIA
Keywords
EFFECTS,, PUBLIC EXPENDITURE,, SELECTED,, MACROECONOMIC,, VARIABLES,, NIGERIA, 1986 – 2012