TITLE:
The Nexus between Nigerian Government Spending and Domestic Output in the Presence of Long-Term Crude Oil Price Shock: A Conditional Unrestricted Equilibrium Correction Model Approach
AUTHORS:
Lawal Omoniyi Ganiyu, Alabi Nurudeen Olawale, Ige Sikiru Ajibade, Ibraheem Rahmat Abisola
KEYWORDS:
Level Relationship, Domestic Output, Government Spending, Single-Equation Approach
JOURNAL NAME:
Open Journal of Statistics,
Vol.6 No.3,
June
14,
2016
ABSTRACT: This paper is an empirical analysis of
provisional unrestricted level relationship between Nigerian domestic output
measured by Gross Domestic Product (GDP) and government spending proxied by
capital and recurrent expenditures in the presence of static regressors such as
crude oil prices and federal government retained revenues. We estimate an ARDL
(1,0,1) using a single-equation approach. Results show that government
expenditures have negative but statistically insignificant effects on domestic
output in the long-run. Similarly, negative short run effects are established
amongst the variables. However, recurrent expenditure is statistically
significant in the short-run. Whilst federal government retained revenue has a
positive and significant effect, crude oil price exhibited negative
relationships with domestic output both at level and in the short-run dynamics.
Also a high speed of adjustment implies that Nigerian Gross Domestic Product is
extremely sensitive to shocks on the government spending in the long-run. An
upward trend forecast between 2014 and 2020 is an indication of the continued
positive impact and the government retained revenue will exert on the domestic
output in the long-run.