On the Non-Linear Relationship between Fiscal Deficit and Inflation: The Nigeria Experience

Oyeleke, Olusola Joel

doi:10.1007/s11294-021-09822-7

Cited by 5 publications

(4 citation statements)

References 31 publications

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“…Dick (2022) found that fiscal policy hider the performance of macroeconomic variables and the entire economy. A similar study by [ 15 ] found contrarily that fiscal deficit has a positive effect on economic growth.…”

Section: Introductionmentioning

confidence: 73%

On the fiscal deficit and economic growth in sub-Saharan Africa: A new evidence from system GMM

Sore,

Ayana,

Demissie

2024

PLoS ONE

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Using a two-step approach GMM, this study examines the short- and long-term effects of fiscal deficit on the economic growth of 42 Sub-Saharan African nations between 2011 and 2021. The World Development Index, the most reliable source, is where the panel data is taken from. Using the Levin-Lin-Chu and Hadri LM tests for unit root, it was determined that there is no risk of a random walk in the data. The study’s findings indicate that while the fiscal deficit has short-term, positive, and significant benefits on the economic growth of SSA countries, it has long-term, negative repercussions. According to the system GMM’s results, an increase in the fiscal deficit of SSA countries is linked to a short-term increase in economic growth of 0.036 percent, while an increase in the fiscal deficit of one percentage point is linked to a long-term decline in economic growth of SSA countries of 0.013 percent, holding all other factors constant. The study’s findings also showed that the budget deficit has a larger positive short-run coefficient than a negative long-run coefficient. The study also revealed that while real effective exchange rates and inflation short-term hinder economic growth, gross fixed capital creation and real interest rates are the primary drivers of economic expansion. Long-term economic growth in the SSA countries is also found to be positively and significantly impacted by gross fixed capital formation. According to the study, SSA nations should manage their fiscal deficits and, in the long run, provide more funds for gross fixed capital development.

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Section: Introductionmentioning

confidence: 73%

On the fiscal deficit and economic growth in sub-Saharan Africa: A new evidence from system GMM

Sore,

Ayana,

Demissie

2024

PLoS ONE

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“…(Nguyen, 2015). Budget deficit is the excess of government spending including interest payment on public debts in a fiscal year relative to its revenue (Bakare et al, 2014;and Oyeleke, 2021). The developing countries like Nigeria experience persistent budget imbalance due to low level of revenue as a result of low tax base, tax evasion and tax rates (Lin and Chu, 2013).…”

Section: Introductionmentioning

confidence: 99%

“…Money supply is the increase in the quantity of money in circulation (Oyeleke, 2021). Persistent budget deficit financed through credit creation to attain macroeconomic objectives usually raises private sector wealth and demand relative to supply of goods and services leads to higher price and induce inflationary pressure (Cata˜o and Terrones, 2005).…”

Section: Introductionmentioning

confidence: 99%

“…Empirically, plethora of studies has been conducted on the nexus between budget deficit and inflation with diverse outcomes (Kundrapam and Pattanaik, 2010;Cata˜o and Terrones, 2005;Lin and Chu, 2013;Mohanty and John, 2014;Jalil et al, 2014;Abu and Karim, 2015;Ishaq and Mohsin, 2015;Agoba et al, 2017;Ramu and Gayithri, 2017;Klein and Linnemann, 2020;Tiwari et al, 2015;Ahmad and Aworinde, 2019;Ssebulime and Edward, 2019;Ali andKhalid, 2019, Khan et al, 2020). In Nigeria, few studies have investigated the link between budget deficit and inflation (Olusoji and Oderinde, 2011;Awe and Olalere, 2012;Oseni and Sanni, 2016;Danlami et al, 2019;Apinran et al, 2019;Olaniyi, 2020;and Fasanya, Fajobi and Adetokunbo;2021). However, these studies considered linear or symmetric modelling of the…”

Section: Introductionmentioning

confidence: 99%

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The asymmetry effect of budget deficit and inflation in Nigeria

Garba

2023

JGEB

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This study evaluates the asymmetry effect of budget deficit and inflation in Nigeria spanning 1986 and 2020. The dissertation employed the Non-linear Autoregressive Distributed Lag (NARDL) approach of Shin, Yu and Greenwood-nimmo (2014) to examine the effect of budget deficit on inflation in Nigeria. The study employed annual data on budget deficit (proxied by budget deficit as a share of GDP), money supply (proxied by money supply), inflation (proxied by consumer price index) collected from Central Bank of Nigeria Statistical Bulletin, 2020 edition. The result of the effect of budget deficit on inflation indicates that in the long run, positive change in budget deficit induces inflation. This result indicates that rise in budget deficit is inflationary in Nigeria. Furthermore, the inflationary role of positive change in budget leads to higher price level. In addition, a negative change in budget deficit exerts an inflationary pressure in the long run though insignificant. Based on the findings of our analyses, the study concludes that budget deficit raises money supply and induces inflationary pressure in Nigeria. The study therefore recommends that there is need for the authorities in Nigeria should reduce the cost of governance by reducing overhead and allowance of political office holder in order to reduce budget deficit.

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Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach

Sumba,

Ochenge,

Mugambi

et al. 2024

Cogent Economics & Finance

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On the Non-Linear Relationship between Fiscal Deficit and Inflation: The Nigeria Experience

Cited by 5 publications

References 31 publications

On the fiscal deficit and economic growth in sub-Saharan Africa: A new evidence from system GMM

On the fiscal deficit and economic growth in sub-Saharan Africa: A new evidence from system GMM

The asymmetry effect of budget deficit and inflation in Nigeria

Public debt and macroeconomic stability among sub-Saharan African countries: a system GMM test approach

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