Components Of Government Expenditures Research Articles

Forecasting expenditure components in Nigeria

PurposeThis study forecasts the government expenditure components in Nigeria, including recurrent and capital expenditures for 2021 and 2022, based on data from 1981 to 2020.Design/methodology/approachThe study employs statistical/econometric problems using the Feasible Quasi Generalized Least Squares approach. Expenditure forecasts involve three simulation scenarios: (1) do nothing where the economy follows its natural path; (2) an optimistic scenario, where the economy grows by specific percentages and (3) a pessimistic scenario that defines specific economic contractions.FindingsThe estimation model is informed by Wagner's law specifying a positive link between economic activities and public spending. Model estimation affirms the expected positive relationship and is relevant for generating forecasts. The out-of-sample results show that a higher proportion of the total government expenditure (7.6% in 2021 and 15.6% in 2022) is required to achieve a predefined growth target (5%).Originality/valueThis study offers empirical evidence that specifically requires Nigeria to invest a ratio of 3 to 1 or more in capital expenditure to recurrent expenditure for the economy to be guided on growth.

Government expenditure on key sectors of the economy and stock market performance in Nigeria

Purpose — This study examines the effect of Government Expenditure (GE) on key sectors of the economy and Stock Market Performance (SMP) in Nigeria.Method — Statistics Bulletin published by the Central Bank of Nigeria (CBN) was utilized as source for time series data between 1980 and 2021. SMP is proxied with MCAP and ASI while expenditure on agriculture, defense, education, and health formed components of government expenditure. The FM-OLS and ARDL methodology were adopted to determine the GE's short and long-term impact on SMP in Nigeria. ADF unit root testing, correlation analysis, Engle and Granger co-integration analysis, and preliminary descriptive statistics testing were all carried out.Result — The outcome indicates that all through the long and short term, GE on education, defense and agriculture have significant influence of SMP in the long run via MCAP channel. GE on defense and agriculture significantly affects SMP in the short run via ASI channel. Hence, this study concludes that GE components are key determinants in explaining the effect of government spending on SMP in Nigeria. The magnitude of this effect is a function of stock market proxy used.Contribution — This study provides empirical evidence on the impact of government spending on key sectors of the economy on stock market performance in Nigeria using two proxies (market capitalization and all share index) in short run and longrun.

Analysing the impact of quality of government expenditure on economic growth: evidence from Indian states

Proliferation of endogenous growth theories has engendered different models connecting government expenditure with a country's long-term growth. Numerous studies based on this growth theory revealed that different components of government expenditure have distinct impact on economic growth due to their differing productivity. Following fiscal consolidation measures in India, the quality of states' government expenditure has been compromised periodically. Therefore, overarching purpose of this study is to empirically examine which component of government expenditure more productively contributes to states' economic growth using a panel data of 29 states/union territories over a period 2004-2005 to 2019-2020. Empirical findings ratify a priori, that capital (revenue) expenditure is productive (unproductive) and positively (negatively) impacts states' economic growth, whereas, economic and social services expenditures are unproductive. The findings have some policy implications in order to sustain and enhance the regional economic growth and to maintain fiscal discipline while persevering with fiscal consolidation.

Are Determinants of Government Expenditure Symmetry or Asymmetry? Fresh Evidence from Nigeria

Nigeria government has been playing the role of internalizing economic externalities, dealing with issue of unemployment and overall welfare of the populace. However, in the presence of huge and rising government expenditure, unemployment, and inflation rate still persist. This therefore called for a revisit of what determines government expenditure. There are three issues yet unresolved in the debate of what drives government expenditure. These are omitted variables bias, aggregation bias and asymmetry issue. To deal with aggregation bias, we focus on the components of government expenditure, that is, capital and recurrent. To address the issue of asymmetry, nonlinear autoregressive distributed lag was employed. Data are obtained for relevant variables spanning 1981–2021. Model of government expenditure developed by Peacock and Wiseman (1961) combined with Devarajan et al (1996) and Giavazzi, et al (2000) models are utilized. The following results are obtained. First, government capital expenditure is countercyclical while recurrent expenditure is procyclical. Second, some drivers of government expenditure, such as exchange rate and oil price, exhibit asymmetry behavior. Asymmetric tax revenue shows potential to drive capital expenditure but significantly and positively influences recurrent expenditure. Asymmetric behavior of oil revenue and exchange rate also engenders capital expenditure. However, asymmetric behavior of degree of openness and inflation rate negatively affects capital expenditure. Asymmetric behavior of tax revenue and oil revenue posted positive effect while exchange rate and degree of openness have negative effect on recurrent expenditure. Period of election is also a strong positive determinant of recurrent expenditure both in the short and long run. Following the nature of cyclicality of the component of government expenditure, the priority of government could be on capital expenditure since it will provide essential public goods required for the economy to flourish. Bearing in mind that oil revenue is volatile, it is imperative for government to rely more on tax revenue than oil revenue. Engaging in forward exchange rate might be appropriate to deal with any possible exchange rate fluctuation.

Asymmetric Impact of Government Expenditure on Economic Growth in Nigeria

"The study investigates asymmetric impact of government expenditure on the economic growth of Nigeria using secondary data that spans through 1981 through 2018. In capturing the asymmetric impact, the study adopted the Non-Linear Auto-regressive Distributed Lag (NARDL) model. Government expenditure components (recurrent and capital expenditure) were decomposed to positive and negative changes due to government review. From the result, it was confirmed that in the short-run, both positive and negative changes in recurrent and capital expenditure had a significant positive impact on economic growth in Nigeria at different time lag. In the long-run, positive changes in recurrent expenditure have a negative impact on economic growth, while negative changes have a positive significant impact on economic growth in Nigeria. Positive changes in capital expenditure have a positive impact on economic growth, while negative changes has a negative 5% significant impact on economic growth. It was concluded from the findings that government expenditure plans has a significant impact on the economic growth of Nigeria in the short-run and long-run. Therefore, it is recommended that government should rebalance its plans between capital and recurrent expenditure to enhance its growth target."

Economic Growth in Saudi Arabia through Sectoral Reallocation of Government Expenditures

The article employs auto-regressive distributed lag (ARDL) cointegration and error-correction modelling to study the long-run impact of investment, exports, imports, and three components of government expenditures (expenditures on health, education, and other government spending) on GDP growth in Saudi Arabia from 1985 to 2018. We observe the long-run positive relationship between GDP, investment, exports and government education expenditure, but a negative relationship between GDP, imports, government health spending, and government other expenditures. The analysis reveals that investment, exports, and government educational expenditures all have long-run positive effects on the GDP growth, while imports, government health expenditures, and government other expenditures negatively affect GDP growth in Saudi Arabia. The Toda-Yamamoto causality test that applies the Modified Wald test establishes causality from exports, government education spending, and government health spending to GDP. We deduce that education expenditures stimulate economic growth in Saudi Arabia in contrast to health expenditures. Additionally, we infer that the various categories of government expenditures have varying effects on GDP. This necessitates a prudent sectoral allocation of public expenditures to maximize its positive effects on GDP growth and stimulate economic growth in Saudi Arabia. Moreover, the above findings have policy implications for the government in Saudi Arabia while allocating its expenditures. Allocating more government expenditures to education, cutting down inessential spending, and downsizing government healthcare expenditures will enhance long-run economic growth in Saudi Arabia. JEL Classification: O470; I15; I25

The Long-Run Relationship between Disaggregated Government Expenditure and Economic Growth in Jordan

The main purpose of this study is to investigate the long run impact of capital and current government expenditures on the economic growth of Jordan during the period 1990-2019. The study variables are integrated of different orders as indicated by Augmented Dickey-Fuller unit root test. Granger causality test has demonstrated the ability of both government expenditure components to cause and predict changes in the economic growth. Engle and Granger cointegration test has revealed that there is a cointegrated long-run relationship between the study variables. Therefore, the study model was estimated by applying two estimation methods; Fully Modified Ordinary Least Squares (FMOLS) and Autoregressive Distributed lag (ARDL) models. The results of both methods showed that capital government expenditure has a significant positive long-run impact on the economic growth, while current expenditure has a significant negative long run impact on such growth according to FMOLS results. Based on these outcomes, the study recommends some procedures that must be implemented by the Jordanian government in order to increase its productive investments and reduce current expenditure.

Do the components of government expenditure affect the long-run dynamics of private investments? A heterogeneous panel analysis with a multifactor error structure

ABSTRACT Using data on 30 OECD countries over 1993–2019, this paper examines the ties between the components of government expenditure and the supply side of the private sector. We employ an ECM version of the novel dynamic common correlated effects estimator (DCCE) in order to account for nonstationarity, country-heterogeneity, and cross-sectional dependence. The estimates suggest that allocating public resources toward general public services and health positively affects the long-run dynamics of private investments. Conversely, rises in the expenditure on housing and social protection are associated with significant crowding-out effects.

Government Expenditure and Economic Growth in Nigeria: a Disaggregated Analysis

Government expenditure is an essential instrument for achieving full employment, price stability, improved standard of living, economic growth and other macroeconomic objectives. However, questions regarding the efficacy of government expenditures to attain these objectives have continued to rise due to the alarming rate of unemployment, inflation, poverty and other socio-economic problems in Nigeria. This has called for the need to investigate the allocation of resources to some selected sectors and their resultant impact on the Nigerian economy. This study examined the effect of various components of Government Expenditures on Economic Growth in Nigeria for periods between 1981 and 2020. The analysis was based on Secondary data. The study adopted the Error Correction model and Granger Causality Test. The short-run model revealed that the components of government expenditures like recurrent expenditures on agriculture, health and education have an insignificant negative impact on economic growth. Recurrent expenditure on debt servicing and road and construction indicated a positive and negligible impact on economic growth. Concerning capital expenditures, government capital expenditures on social services were shown to have a negative and significant impact on economic growth. In contrast, government capital expenditures on economic services indicated a positive and insignificant impact on economic growth in Nigeria. In the long run, all the components of government expenditures employed showed a significant effect on economic growth. The research finding establishes no clear conclusion about whether Keynesian or Adolf Wagner's law is operational in Nigeria. The study concludes that the Nigerian economy is on the wrong path to sustainable growth and development. The study recommends that the government should increase its allocations to priority sectors like health, education, agriculture and infrastructures. Furthermore, the government should stimulate investment and output using monetary and fiscal policies to increase internally generated revenue and reduce government borrowing. Lastly, the study emphasises the need to improve government spending efficiencies, transparency in budgetary processes, and strict monitoring of government projects.

Public Expenditure and Economic Growth: A Test of Wagner’s and Keynes Hypotheses in Nigeria and Angola Economies

This study verifies the validation of Wagner’s theory and Keynes's hypothesis between three main government expenditure components (Health expenditure, education expenditure, and capital investment expenditure) and economic growth in Nigeria and Angola. The study employs Johansen cointegration and pairwise granger causality as the estimation techniques. Findings revealed no evidence of long-run relationships with government expenditure components of health, education, and capital investment and economic growth. The study equally reveals the validation of Wagner’s theory between growth and expenditure on health in both Nigeria and Angola. Evidence that confirms both Wagner’s theory and Keynes's hypothesis between growth and expenditure on education in Angola and validation of only Keynes hypothesis in Nigeria was found. Also, the study confirms the validation of Keynes's hypothesis between government expenditure on capital investment in both Nigeria and Angola

The Causal Link Between Government Expenditure And Economic Growth In Egypt Over The Period From 1952 To 2020.

Several studies have examined the causal relationship between government expenditure and economic growth. These studies yielded mixed results. Therefore, this study seeks to know the direction and nature of the relationship between government expenditure and economic growth in Egypt during the period from 1952 to 2020. Advanced econometric models were used for this purpose. The ADF (Augmented-Dickey Fuller) and PP (Phillips and Perron) test were used to verify the stationarity of the time series of the variables under study. The Granger causality test was also relied on to determine the direction of the relationship between government expenditure and economic growth in Egypt, and the VAR model (Vector auto regression model) to find out the nature of the relationship between government expenditure and economic growth. The study found that government expenditure is the motive of economic growth in Egypt, and the relationship between them is positive, meaning that the relationship between them is in one direction and starts from government expenditure . This means that the second trend, led by Keynes, applies to the state of the Egyptian economy. It also expresses that the Egyptian economy is still dependent on the government to achieve economic growth and is governed by excessive governmental interventions, tight administrative policies and restrictions, a large and inefficient public sector and a low role for the private sector. In the future, the researcher hopes that other studies will seek to search for the direction and nature of the relationship between the components of government expenditure and economic growth in Egypt.

On the linkage between government expenditure and output: empirics of the Keynesian view versus Wagner’s law

Using disaggregated data based on the classification of functions of government (COFOG), this study seeks to verify the Keynesian view versus Wagner’s law on the relationship between government expenditure and output, considering Turkey as a case study. To do so, the study attempts to capture the nature of the causal relationship between the two variables by applying linear and nonlinear Granger-causality tests. Rather than Wagner’s law, the empirical findings of the study provide supportive evidence for the Keynesian view, subject to the economically meaningful components of government expenditures considered. Overall, the empirical findings show that government expenditures on defense, economic affairs, education, health, housing and community amenities, and social protection positively affect output that comes out through fiscal multiplier and investment-accelerator mechanisms proposed by John Maynard Keynes.

The Impact of Government Expenditure on Banten Economic Growth in 2010 – 2017

Government expenditure is one of the factors driving the economic growth of a region. During 2010 to 2017, realization of Banten government expenditure continued to increase from 11 trillion to 36 trillion. However, Banten's economic growth from 2011 to 2017 tended to slow down from 7.03 percent to 5.71 percent. This study aims to determine how the impact of government expenditure on Banten economic growth and identify government expenditure in the form of capital spending that has a positive effect on Banten economic growth. Capital spending as a component of government expenditure directly related to the government's development program is expected to be able to encourage economic growth in Banten. The method used in this study is the impact analysis of Banten Input-Output (I-O) Table 2010 and panel data regression analysis in eight districts/cities during 2010 to 2017. The results of analysis with IO Table show that government expenditure has a positive impact on Banten’s economic growth. Then the panel data regression analysis results show that all types of capital spending have a positive effect, but only spending for road, irrigation, network (BJIJ); and building (BGB) which have proven to have significant effects on Banten's economic growth.

Effect of Government Expenditure Components on Agricultural Productivity in Nigeria (1981-2017)

We analyzed the relationship between government expenditure components and agricultural productivity in Nigeria by estimating the effects and their causal interaction over the period 1981-2017. The study employed the Autoregressive Distributed Lag (ARDL) technique to identify the existence of cointegration while going further by estimating the short and long run effects of government expenditure components on agricultural productivity as well as the Granger causality and Block Exogeneity tests under the Vector Autoregressive (VAR) models to analyze their causal relationship. Data were sourced from the Central Bank Statistical Bulletin, 2017 edition. The ARDL results revealed that there exists a long run relationship among the variables and showed that various components of government expenditure can positively improve agricultural productivity in Nigeria, but the current effects of these variables on agricultural productivity appears insignificant. The results revealed that the government expenditures on health and infrastructure have little effect on agricultural productivity and expenditures on education have a reduction effect on agricultural productivity in both short and long runs in Nigeria; highlighting the disconnection between agricultural knowledge acquisition and its implementation. Causality tests also showed that expenditures on education, health and infrastructure can help improve agricultural productivity in Nigeria. The study recommended effective policy implementation through a complete overhaul of the various government institutions and agencies responsible for implementation, revenue collection and monitoring of government project as it relates to agricultural development as well as encourage effective manpower development in the agricultural sector to boost productivity. Keywords: Agricultural credit; Agriculture productivity; Autoregressive Distributed Lag, Government Expenditure, Inflation; Vector Autoregressive model. DOI : 10.7176/JESD/10-18-01 Publication date :September 30 th 2019

THE DYNAMIC CORRELATION BETWEEN FISCAL SPENDING ON EDUCATION, HEALTH, CONSUMPTION AND STANDARD OF LIVING IN NIGERIA

The fiscal spending of the government have always been a strong instrument towards achieving development and recovering economy from recession. This paper investigates the long run and short run impact of three component of government expenditure (education, health, and consumption expenditure) on standard of living in Nigeria with time series data from 1981 to 2017. The study employs ordinary least square method of estimation on a range of equation models: Vector Error Correction Model (VECM) and the Impulse Responses Function Model. The result shows that fiscal spending on education, health, and consumption have a long run relationship with standard of living in Nigeria and the speed of adjustment towards long –run equilibrium is 61.45%, moderately high. The short run coefficient results reveals that education expenditure in both lag 1 &2 have a positive and significant impact on standard of living while health and consumption expenditure have insignificant impact on standard of living in Nigeria. Using Impulse Response Function model, we found that none of our fiscal spending variables (education expenditure, health and consumer spending) were able to emit positive impulses/shocks on the standard of living in Nigeria. The study recommends that government should ensure that fiscal spending on education, health, and consumption should be well managed, accounted for and the method should be transparent to the populace.

The impact of productive and non-productive government expenditure on economic growth: an empirical analysis in high-income versus low- to middle-income economies

This paper examines the relationship between the compositions of government expenditure and economic growth. It develops an endogenous growth framework drawing on variables from existing models, and separates government expenditure into productive and non-productive forms. Using panel data from 37 high-income and 22 low- to middle-income countries covering 1993–2012, our findings are based on OLS fixed effects and GMM techniques. We challenge much of the existing empirical literature in relation to developing economies by showing that a shift in government expenditure away from non-productive government expenditure and towards productive forms of expenditure are associated with higher levels of growth in both high-income and low- to middle-income economies. Moreover, we identify the differing components of government expenditure that are most associated with increased long-run output levels in both high-income and low- to middle-income economies.

The Impact of Government Expenditure on Economic Growth in Nepal

This study investigate the impact of government expenditure on economic growth in Nepal. Annual series data between 2002/03 to 2015/16 is used for the study. Economic growth is dependent variable whereas, total capital expenditure, total recurrent expenditure, agriculture, non-agriculture, industry, service and inflation are independent variables. The major objective of the study is to examine the effect of different component of government expenditure in economic growth in context to Nepal. Data are collected from economic survey of Nepal. The tools of analysis are the regression model between the variables, DW Test and for multicollonearity between the variables, VIF test is used. The empirical result shows that there is positive correlation between the dependent variable economic growth and the predictors like agricultural, non-agricultural, industry and service sector. Whereas, total current and recurrent expenditure and inflation are negatively related to economic growth. The beta coefficient is positively significantly for agricultural, non-agricultural, industry, and service sector, it implies that higher the investment in agricultural and non-agricultural sector higher would be economic growth. Similarly, higher the investment on industry and service sector of the country, higher would be economic growth. More specifically, the value of D-W value is 1.301 which implies that there is no autocorrelation between the variables.

Impact of Various Components of Government Expenditure on Economic Growth: Evidence from Developed and Developing Countries

The primary objective of the paper is to study how different components of government spending affect economic growth using panel data for 20 developed and developing countries from 2001 to 2014. The empirical results in this area of study are mixed. Two classifications of the government expenditure have been adopted-economic (current and capital expenditures) and functional (expenditure on defence, health, education and social protection). Panel data, both random effects (RE) and fixed effects (FE), have been estimated for developed and developing countries as well as for the pooled sample. Hausman specification test has been applied to select between the FE and RE model. Empirical estimates indicate that (1) according to the economic classification, current expenditures negatively affect economic growth, and the effect is significant for developed countries and pooled sample. The effect of capital expenditures is negative only for developing countries; however, the coefficients are statistically insignificant for all the three sets of countries. (2) As per the functional classification, defence expenditures negatively affect economic growth, and the effect is significant for developed countries and pooled sample. Government spending on health and education has a positive effect on the rate of growth of per capita income. However, the effect is statistically significant only for education, that too for developed countries and pooled sample. The impact of public spending on social protection is less clear for developed and developing countries. For the pooled sample, the effect is positive but insignificant. Empirical results suggest government expenditures if deployed conductively can be a significant determinant of economic growth.

The Impact of Government Expenditure on Economic Growth in Kenya: 1963-2008

The rapid growth in government expenditure in Kenya has caused concern among policy makers on the implication of such growth. Over the three decades, government expenditure in the country grew at a faster rate than the growth rate of GDP. Given this fiscal scenario, an explanation of this requires studying the impact of government expenditure on economic growth. The specific objectives of the study were to: investigate the relationship between the components of government expenditure and economic growth; examine the effects of components of government expenditure on GDP growth rate; analyze the effects of government expenditure reforms on economic growth; and to draw policy implications from the findings. The data used were government expenditure components that included expenditure on government investment, physical infrastructure, education, health care, public debt servicing, economic affairs, general administration and services, defense, public order and national security, and government consumption. Sources of data were Kenya government documents and international financial statistics publications. The study applied Vector Auto Regression estimation technique using the annual time series data for the period 1963 to 2008 to evaluate the impact of government expenditure on economic growth. The Johansen cointegration tests revealed a long-run relationship between GDP growth rate and the selected components of government expenditure. Further, the Granger- Causality test indicated bi-directional causality between GDP growth rate and components of government expenditure. The results of impulse response functions and variance decomposition revealed that government expenditure on investment, physical infrastructure, education, health care, public debt servicing, economic affairs, general administration and services, defense, public order and national security and government consumption have effect on economic growth. Furthermore, the study established that expenditure reforms of budget rationalization, expenditure downsizing, privatization and governance affect economic growth. The study concludes that the composition of government expenditure and public expenditure reforms matter for economic growth.

Public Intangibles: The Public Sector and Economic Growth in the SNA

This paper sets out a framework for analyzing the impact of public investments on industry‐level productivity and economic growth. The concept of capital in the public sector is broadened from that which is mostly tangible (e.g. physical infrastructure) to that which also includes intangibles and long‐lasting societal assets. For the analysis of public investments, we find that in addition to expanding the asset boundary, national accounts also need to: (a) impute a net return to government and other non‐market capital—or provide industry‐level data by institutional sector of origin, allowing researchers to do so; (b) include all public payments to industry in industry‐level gross operating surplus (i.e. all subsidies, production, and product, and the annuity value of investment grants); and (c) provide crosswalks for key components of government expenditure by function of government (e.g. public funds for extramural R&D or worker training) to kind‐of‐activity classifications used for industries.