IMPACT OF BUDGET DEFICIT ON ECONOMIC GROWTH IN NIGERIA, (1981-2015)

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ABSTRACT

The study on the impact of budget deficit on economic growth in Nigeria employed time series data within the period of 34 years (1981-2015). The data was sourced from central Bank of Nigeria (CBN), National Bureau of statistics (NBS) and World Bank: World Development indicators. The series was subjected to unit root test of both ADF and PP test and was found stationary, some at level and others at first difference. The researcher further tested for short run and long run relationship among the variables using the ARDL model to test for cointegration and Granger Causality test was also conducted in order to ascertain whether budget deficit granger cause economic growth. The obtained results show a significant but negative relationship between government budget deficit and economic growth in both the short run and long run analysis. Also, the obtained result from the Granger test indicates that budget deficit does not granger cause economic growth. The study therefore recommends that government reduce or completely discourage budget deficit.

TABLE OF CONTENT

TITLE PAGE………………………………………………………………………….i

DECLARATION………………………………………………..…………………....ii

APPROVAL PAGE………………………………………………………………….iii

DEDICATION……………………………………………………………………….iv

ACKNOWLEDGEMENT……………………………………………………….......v

TABLE OF CONTENT…………………………………………………………….vii

ABSTRACT………………………………………………………………………...ix

CHAPTER ONE

1.0 INTRODUCTION………………………………………………………………..1

1.1 BACKGROUND TO THE STUDY……………………………………………...1

1.2 STATEMENT OF RESEARCH PROBLEM………………………………….....3

1.3 RESEARCH QUESTIONS………………………………………………………3

1.4 OBJECTIVE OF THE STUDY………………………………………………......4

1.5 SIGNIFICANCE OF THE STUDY…………………………………………..….4

1.6 SCOPE OF THE STUDY……………………………………………………...…5

1.7 OUTLINE CHAPTERS…………………………………………………………..5

CHAPTER TWO: LITERATURE REVIEW

2.0 INTRODUCTION……………………………………………………………….6

2.1 THEORETICAL/CONCEPTUAL LITERATURE……………………………....6

2.1.2 BUDGET DEFICIT: EXPANSIONARY FISCAL POLICY ………………...7

2.1.3 NEOCLASSICAL THEORY…………………………………………………..8

2.1.4 THE RICARDIAN THEORY………………………………………………..9

2.1.5 THE KEYNESIAN THEORY……………………………………………….10

2.3 EMPIRICAL LITERATURE………………………………………………….11

CHAPTER THREE: RESEARCH METHODOLOGY

3.0 INTRODUCTION…………………………………………………………..….19

3.1 THORITICAL FRAMEWORK…………………………………………………19

3.2 SOURCES OF DATA………………………….…………………………….....20

3.3 DATA DESCRIPTION…………………………………………………………20

3.4 MODEL SPECIFICATION……………………………………………………20

3.5 TECHNIQUES OF DATA ANALYSIS………………………………………21

3.5.1 AUTOREGRESSIVE DISTRIBUTEDBLAG (ARDL)…………………….21

3.5.2 GRANGER CAUSALITY TEST……………………………………………..22

3.5.3 AUGMENTED DICKEY-FULLER (ADF) TEST…………………………...23

CHAPTER FOUR: PRESENTATION RESULTS AND DISCUSSION

4.1 INTRODUCTION…………………………………………………………..…25

4.2 INTERPRETATION OF RESULT…UNIT ROOT TEST……………………25

4.3 BREUSCH-GODFREY TEST FOR SERIAL CORRELATION…………..26

4.4 HECTEROSKESDASTICITY TEST…………………………………………26

4.5 NORMALITY TEST……………………………………………………….…...26

4.6 CUSUM TEST FOR STABILITY……………………………………….……..26

vii

4.7 RESULTS AND DISCUSSION………………………………………………..27

4.7.1 SHORT RUN ANALYSIS……………………………………………………27

4.7.2 LONG RUN ANALYSIS……………………………………………………28

4.7.3 RESULTS OF CAUSALITY TEST………………..…………………………29

4.7.4 SUMMARY OF FINDINGS…………………………………………………29

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.0 INTRODUCTION………………………………………………………………31

5.1 SUMMARY………………………………………………………….………….31

5.2 RECOMMENDATION…………………………………………………………32

5.3 CONCLUSION…………………………………………………………………34

5.4 RESEARCH GAP/SUGGESTION……………………………………………..34

REFERENCE

APPENDIX

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IMPACT OF BUDGET DEFICIT ON ECONOMIC GROWTH IN NIGERIA, (1981-2015)

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