Twin Deficit in Nigeria: A Re-Examination

Amaghionyeodiwe, Lloyd Ahamefule

doi:10.14706/jecoss15528

Cited by 5 publications

(7 citation statements)

References 12 publications

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“…While some studies like Siddiki (2010), Isiaq and Bolaji (2016) and Frank and Peter (2020) employed government deficit finance variables on private consumption and most found supporting evidence of Keynes that fiscal policy or deficit financing impacts the consumer aggregate spending. Other studies like (Ricciuti;2003;Normandin;1999;Amaghionyeodiwe and Akinyemi;2015) employed government deficit finance variables on current account deficit. While Normandin found supporting evidence for the twin deficit, Ricciuti does not find any existing impact of deficit finance on currency account deficit.…”

Section: Empirical Literaturementioning

confidence: 99%

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Review of Ricardian Equivalence in Theory and Practice: Empirical Data from Nigeria

ISAH¹,

Joseph²,

DAIRO³

2022

AJMSS

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This study investigates the Ricardian Equivalence (RET) in theory and practice particularly as it relates to Nigeria economy. The study employed Autoregressive Distributed Lagged (ARDL) model to establish both the long-run and short-run relationship between deficit financing and consumption. The study found no strong evidence to reject the Ricardian Equivalence using data from Nigeria economy contrary to most literatures reviewing RET in Nigeria. Specifically, the study found that deficit financing variables like debt, tax revenue, and government expenditure have significant impact on consumption when the strict assumption of RET is not introduced in the model but became insignificant when ratio of tax revenue to changes in debt is introduced in the model. The study therefore concludes that Ricardian Equivalence is valid in the case of Nigeria when strict assumption of RET is maintained but insignificant when the major assumption of RET is relaxed or when deficit finance variables enter the model indirectly. The study therefore recommends that while government embraces deficit financing to stimulate the economy, it should be done with utmost care not induce stagflation thereby eroding the small gain from the stimulation.

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Section: Empirical Literaturementioning

confidence: 99%

“…The study application of OLS to estimate the model produce result that suffers from endogeneity issues Amaghionyeodiwe & Akinyemi (2015) The study employed VECM and granger causality test to determine the relationship between budget deficit and current account deficit…”

Section: Data and Sourcesmentioning

confidence: 99%

Review of Ricardian Equivalence in Theory and Practice: Empirical Data from Nigeria

ISAH¹,

Joseph²,

DAIRO³

2022

AJMSS

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“…It is based on these assumptions that the criticisms of Mundell-Fleming Framework and the Ricardian Equivalence Hypothesis (REH) were formed. Notably, the neoclassical proponents argued that in a Ricardian framework, budget deficits that are financed through slashes in taxes and sales of government bonds would be seen by households as incurring future tax liabilities to service, and eventually retire increased debt (Ratha, 2011;Amaghionyeodiwe & Akinyemi, 2015). The Ricardian equivalence hypothesis (REH) dispenses entirely with the income-expenditure approach, and instead relies on the intertemporal approach.…”

Section: Theoretical Reviewmentioning

confidence: 99%

Interrelationship Between Fiscal Deficit, Aggregate Savings and Investment: A Test of Ricardian Equivalence Hypothesis in Nigeria

Ikechukwu

Omojolaibi

2020

Tanzanian Economic Review

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Conflicting results on the relationship between government fiscal deficit, savings and investment behaviour of households remains unresolved. Some authors have argued that households might unconsciously play out adherence to the dictates of the Ricardian equivalence hypothesis (REH) because they practice an infinite consumption horizon. Relying on the vector autoregression (VAR) technique and the impulse response function (IRF), this study examines the validity of the REH and the interactions between fiscal deficit, aggregate savings, and private investment in Nigeria within a 48-year period. The results reveal that government fiscal deficit exerts negative effects on gross domestic savings and investment, which is further affirmed by the impulse response function (IRF). These findings rather uphold the neoclassical literary arguments that economic growth is retarded due to crowding out effects resulting from fiscal deficits; hence opposing the REH. Thus, policy-makers should adhere to the fiscal deficits benchmark of less than 40 percent of GDP as proposed by the International Monetary Fund (IMF) to maintain stable macroeconomic conditions. JEL Classification: E62, E21-E22, E23

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“…In fact, the decline in private investment was likely to have been much steeper than indicated by the data in view of the inclusion of investments by public corporations in capturing private investment. 4: Fiscal Indicators, 1971-2017(% of GDP) 1971-19731974-197619771978-19801981-19831984-19861987-19881989-1991-19941995-1997-20002001-20032004-200620102015-2017 ) 1971-1973 1974-1976 1977 1978-1980 1981-1983 1984-1986 1987-1988 1989-1991 1992-1994 1995-1997 1998-2000 2001-2003 2004-2006 2007-2009 2010-2012 2013-2014 2015-2017…”

mentioning

confidence: 99%

“…The same direction of causality is established in Asrafuzzaman, Amit, and Gupta (2013) for Bangladesh using Granger causality tests and VECM using annual data for fiscal years 1972 to 2012. Amaghionyeodiwe and Akinyemi (2015) applying VECM and Granger causality to annual data from 1982 to 2010 of Nigeria ascertained cointegration and a causality from the current account to the fiscal account. Katircioglu, Fethi, and Fethi (2009) used panel estimation to determine causality between current account and the fiscal balance in 24 developing island states.…”

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confidence: 99%

Sri Lanka�s Macroeconomic Challenges:

Weerakoon¹,

Kumar²,

Dime³

2019

ADB South Asia Working Paper Series

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Note: Format of the date of arrangement is month-date-year. In 2003, there were two arrangements: one of the arrangements was an Extended Fund Facility and the second was the Poverty Reduction and Growth Facility. The two are counted as single arrangements here. Source: International Monetary Fund. 7.The twin deficits problem is a major source of economic vulnerability in the region with most South Asian economies reporting fiscal and external imbalances. Fiscal consolidation remains a policy priority for most of the countries in South Asia, including Sri Lanka, and domestic revenue mobilization is a key factor in the consolidation process.

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Twin Deficit in Nigeria: A Re-Examination

Cited by 5 publications

References 12 publications

Review of Ricardian Equivalence in Theory and Practice: Empirical Data from Nigeria

Review of Ricardian Equivalence in Theory and Practice: Empirical Data from Nigeria

Interrelationship Between Fiscal Deficit, Aggregate Savings and Investment: A Test of Ricardian Equivalence Hypothesis in Nigeria

Sri Lanka�s Macroeconomic Challenges:

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