Explaining the incidence of household healthcare expenditure in Nigeria under a regime of low fiscal provision: Is the exchange rate important?

Abstract

This study investigates the effect of public health expenditure and the ever‐depreciating exchange rate on household health expenditure while controlling for gross domestic product per capita and consumer price index. We determined the stationarity properties of the series using the Lee and Strazicich, Economic Bulletin, 2013, 33, 2483–2492 and the Augmented Dickey Fuller test to confirm that none of the variables was integrated at an order higher than one. The ARDL bound test for cointegration and the Johansen procedure both confirmed the existence of long‐run relationship among the series. From the Autoregressive Distributed Lag Model results, study reveals that public health expenditure has decreasing impact on the incidence of household health expenditure in both the short‐ and long‐run. Household health expenditure is also found to be exchange rate elastic in the long‐run. The VECM Granger causality result reveals a long‐run unidirectional causality running from public health expenditure, exchange rate, income and domestic prices to household health expenditure. Our study suggests fiscal expansion for health, exchange rate appreciation measures and health risk protection for both the formal and informal sectors.