FISCAL DEFICIT FINANCING AND ECONOMIC DEVELOPMENT: EMPIRICAL EVIDENCE FROM NIGERIA (2005-2014)

ABSTRACT

This study examined Fiscal Deficit Financing and Economic Development using empirical evidence from Nigeria from 2005-2014. Methodologically, the study adopted a quantitative research; employing time-series data (on Human Development Index which was used as a proxy for Economic Development and on Budget Deficit, External debt, Domestic Debt which were proxies for Fiscal Deficit Financing and on Interest Rate which was used as a control variable) sourced from the CBN Statistical Bulletin and Annual Reports 2015. Statistically, univariate analysis (using ADF and PP) tests, Johansen Co-integration test, OLS (short-run and long-run) analyses were performed. Multicollnearity test was performed to determine the absence of high collinearity among the explanatory among the variables. Empirical evidence from the analyses show that fiscal deficits which have now become a monotonous recurrent expenditure of government budgets in Nigeria for decades especially in the Nigerian context and within the period under review, have a negative impact on economic development. Consequently, it is therefore recommended inter alia, that government should endeavour to avoid consistent budget deficits. Budget deficit is not totally avoidable but can be controlled.

TABLE OF CONTENTS

TITLE PAGE----------i

DECLARATION----------ii

CERTIFICATION---------iii

DEDICATION----------iv

ACKNOWLEDGEMENT--------v

ABSTRACT----------vii

TABLE OF CONTENTS-------viii

LISTS OF TABLES---------ix

CHAPTER ONE: INTRODUCTION

1.1Background to the Study------1

1.2Statement of the Problem-------3

1.3Objectives of the Study--------4

1.4Research Questions--------5

1.5Statement of Hypotheses-------5

1.6Significance of the Study-------5

1.7Scope of the Study--------6

1.8Limitation of the Study--------7

1.9Plan of the Study---------8

1.10Definition of Terms--------9

REFERENCE----------10

CHAPTER TWO: LITERATURE REVIEW

2.1Introduction---------11

2.2Theoretical Framework--------11

2.2.1Crowding-Out Effect--------11

2.2.2Keynesian Twin-Deficit Theory-       -        -           -        -         -        14

2.2.3Ricardian Equivalence Theory-        -         -          -         -         -        18

2.2.4Monetarist Theory-      -           -        -        -         -         -         -         21

2.3Empirical Literature-      -        -        -         -         -         -         -         34

2.3.1Empirical Studies Outside Nigeria-            -          -          -        -         34

2.3.2Empirical Studies from Nigeria------41

2.3.3Observed-Gap from Empirical Literature-----52

2.4Summary of Reviewed Literature------53

REFERENCES----------58

CHAPTER THREE: RESEARCH METHODOLOGY

3.1Research Design---------65

3.2Nature and Sources of Data-------65

3.3Method/Techniques of Data Analysis------66

3.4Model Specification--------67

3.4.1Theoretical (A Priori Expectations)------68

3.5Measurement/Description of Variables-----69

3.5.1Description of Dependent Variable------69

3.5.2Description of Independent Variables------69

3.5.3Description of Control Variables------70

REFERENCE----------72

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1Introduction---------73

4.2Data Presentation---------73

4.3Data Analyses---------74

4.4Discussion of Findings--------86

REFERENCE----------88

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1Summary----------90

5.2Conclusion----------92

5.3Recommendations--------93

5.3.1Contributions to Knowledge-------93

5.3.2Recommendations for Further Studies-----94

REFERENCE----------95

APPENDIX----------