Abstract
The paper examines fiscal policy regulations as a tool for enhancing economic growth and poverty reduction in Nigeria using data covering the period 1981-2014 obtained from Central bank of Nigeria and World Development Indicators. The study employed econometric methods of Ordinary Least Square (OLS), Augmented Dickey-Fuller (ADF) Unit Root test, Johansen Co-integration test and Vector auto-regression (VAR) to analyze data empirically. Results from data analyzed suggest that tax revenue, external borrowings, government domestic debt and government capital expenditure have not contributed significantly to economic growth and poverty reduction in Nigeria. However, government recurrent expenditure was found to be statistically significant and impacted on the gross domestic product per capita during the study period. This may be attributed to the reason that recurrent expenditure has a deep rooted and faster influence on growth than capital expenditure. Capital expenditure, which is a long-term expenditure, is more prone to misappropriation and theft, and also could be less growth enhancing. The empirical result is consistent with and strongly upheld the Keynesian’s view that government expenditure causes economic growth.
Highlights
The intent of fiscal policy is essentially to stimulate economic and social development by pursuing a policy stance that ensures a sense of balance between taxation, expenditure and borrowing that is consistent with sustainable growth
The regression results, reveal that the total recurrent expenditure is characterized by the higher positive value of coefficient as compared to that of the total capital expenditure, tax revenue, external debt, and domestic debt, The results reveal that every well utilized naira unit of recurrent expenditure, capital expenditure, domestic debt, external debt and tax revenue has the ability to impact positively on economic growth of Nigeria
A good performance of an economy in terms of per capita growth may be attributed to a judicious use of total government expenditure in Nigeria
Summary
The intent of fiscal policy is essentially to stimulate economic and social development by pursuing a policy stance that ensures a sense of balance between taxation, expenditure and borrowing that is consistent with sustainable growth. In 2008, the EU adopted the European Economic Recovery Plan (EERP) equivalent to 1.5 % of the EU GDP Beetsma and Giuliodori (2011) These examples are just a subset of the stimulus packages by G20 governments. While policymakers continued to rely heavily on active fiscal policy as a policy instrument, as demonstrated during the current global recession, academic researchers have not reached a consensus about the effects of fiscal policy on macroeconomic variables, or about the magnitude of such effects. This stands in stark contrast to ijbm.ccsenet.org. The study is organized as follows: section two reviews theoretical and empirical literatures on fiscal policy, section three deals with the methodology, section four presents the data analysis and discussion while the last section 5 concludes the study
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