The impact of macroeconomic variables on the budget deficit in Bangladesh: an econometric analysis

Alam, Md. Mahbub; Sadekin, Md. Nazmus; Saha, Sanjoy Kumar

doi:10.1108/sajbs-05-2020-0141

Cited by 11 publications

(10 citation statements)

References 31 publications

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“…This means that a 1% change in exchange rate may bring about change in budget deficit in Nigeria. This finding is consistent with the work of Alam et al, (2020) The log of external debt is negative and statistically significant at 1% level. This indicates that the government is short on resources, a decline in external debt would minimize the budget deficit.…”

Section: Resultssupporting

confidence: 92%

“…Result indicates that government finances are the major cause of the budget deficit from domestic sources rather than foreign sources. Similarly, using VECM in Bangladesh, Alam et al, (2020) reveal that exchange rate, inflation, trade and money supply have positive effects on budget deficit in the long run while negative effects have been identified in the short run. Akalpler and Panshak (2019) examines the link between Nigeria's current account deficit and its budget deficit using annual time series data spanning 1980 to 2016.…”

Section: Literature Reviewmentioning

confidence: 98%

“…To begin with, only a few attempts have been made to research the determinants of Nigeria's fiscal deficits, and their results are conflicting (see, Osahon and Oriakhi, 2013;Bakare, 2014). Second, although most previous research has focused on macroeconomic variables (see, Alam et al, 2020;Bangura et al, 2016), this analysis combines macroeconomic and financial control variables associated with high budget deficits into a single equation. This is a subject that has not received much attention in the literature.…”

Section: Introductionmentioning

confidence: 99%

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Determinants of Budget Deficit in Nigeria

Shehu

Adamu

2021

JIBE

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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.

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Section: Resultssupporting

confidence: 92%

Section: Literature Reviewmentioning

confidence: 98%

Section: Introductionmentioning

confidence: 99%

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Determinants of Budget Deficit in Nigeria

Shehu

Adamu

2021

JIBE

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“…However, in the short run at a 1% significance level, CAD increases to 0.04944% points when BD rises by 1% points. The coefficient of INF demonstrates that a 1% point rise in the variables generates a 0.0903% point rise of CAD in the long run which is consistent with Alam et al (2020) and 0.1777% deficit in the current account in the long term due to 1% point rise in RR but the estimation found to be insignificant. In the long and short term, each percentage point rise in GDP decreases CAD by about À3.036 and À43.011% points.…”

Section: 6mentioning

confidence: 56%

Justification of the twin deficit hypothesis in Bangladesh

Lubna,

Saha

2024

ITPD

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PurposeIn light of Bangladesh’s economy, the goal of this study is to examine the “Twin Deficit Hypothesis (TDH),” which refers to a link between the budget deficit and the current account deficit. This study used yearly time series data from 1980 to 2020 to investigate the phenomena.Design/methodology/approachA multivariate autoregressive distributive lag (ARDL) model has been presented for empirical investigation, with the ARDL bound test investigating the co-integration between the inadequacies. As some of the variables in the bound test lack co-integration, the study adds a multivariate vector autoregressive (VAR) model later on.FindingsWith evidence of the result, the study supports the validation of twin deficit hypothesis in Bangladesh economy since both current account deficit and fiscal deficit affects each other significantly whereas Granger causality test confirms that fiscal deficit causes current account deficit but not the other way around.Practical implicationsThe government should maintain a restrictive monetary policy in order to stabilize the current account deficit.Originality/valueThe novelty of this study is the incorporation of inflation, real exchange rate and GDP per capital to TDH that together form the basis for a macroeconomic snapshot of the economy.

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“…In the viewpoint of Ricardian (Barro, 1989), budget deficit financing is seen as a neutral effect on economic growth. Therefore, the effect of budget deficits depends on how the budget deficit is financed (Alam et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

Effect of Deficit Financing on Economic Growth in Bangladesh: Cointegration and VECM Approach

Alam

Sadekin

Islam

et al. 2021

FIIB Business Review

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Bangladesh has been encountering a budget deficit since 1972 because of a decrease in the source of income. This paper aims to examine the effect of budget deficit financing on economic growth in Bangladesh throughout 1981–2018. Using secondary data, the paper uses the cointegration test, vector error correction mechanism (VECM) and Granger causality test. Johansen’s cointegration test outcomes find that the study variables are cointegrated and subsequently have a long-run nexus among the variables. The study finds that in the long run, government domestic debt (GDD), government external debt (GEXD) and money supply (MS) affect positively economic growth (RGDP). The outcomes of the VECM approach express that in the short run, GDD, external debt and MS negatively affect economic growth. Also, short-run causality runs from the GDD, GEXD and MS to economic growth. The Granger causality test result shows unidirectional causal nexus running from GDD to RGDP, RGDP to external debt and GEXD to MS, and bidirectional causal nexus between MS and GDD in Bangladesh. The study suggests the governments should enhance moderate levels of domestic and external borrowing and uses it in productive and efficient ways to accelerate economic growth in Bangladesh.

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The impact of macroeconomic variables on the budget deficit in Bangladesh: an econometric analysis

Cited by 11 publications

References 31 publications

Determinants of Budget Deficit in Nigeria

Determinants of Budget Deficit in Nigeria

Justification of the twin deficit hypothesis in Bangladesh

Effect of Deficit Financing on Economic Growth in Bangladesh: Cointegration and VECM Approach

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