The Causality between Government Expenditure and Economic Growth in Nigeria

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Date

2016

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Faculty of Economics, Aurel Vlaicu University, Romania

Abstract

The relationship between government expenditure and economic growth has been an issue of debate over the years. This study investigates the causality between government expenditure and economic growth in Nigeria between 1985 and 2014. Following the Toda-Yamamoto non-Granger causality testing approach, it finds that government expenditure and economic growth have no causal effect on each other. This offers evidence to invalidate Wagner's law and the Keynesian proposition in Nigeria. This study recommends that government should strengthen its efforts to curtail corruption as well as introduce stricter checks and controls to reduce or eliminate the profligacy of public funds.

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Keywords

Government expenditure, Economic growth, Wagner's law, Keynesian proposition

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