Cointegration,Causality and Wagner's Hypothesis:Time Series Evidence for Nigeria, 1970-2008
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This paper examines the validity of Wagner’s Law of long-run causal relationship between national income and public expenditure for Nigeria over the period 1970-2008. Deploying modern advances in Econometric techniques, such as the autoregressive distributed lag (ARDL) bounds testing approach to cointegration,vector error-correction method (VECM) and the standard Granger causality test, we found strong support forWagner’s longrun postulate of causal relationship from national income to public expenditure in Nigeria. However, we also found that there is a short run causal relationship running from public expenditure to national income in Nigeria, in validation of Keynesian theory. The policy implication of our findings is that public expenditure still remains a veritable short run instrument that could be utilized to stimulate economic growth in Nigeria, since national income does not explain short run changes in public expenditure in the country, except in the long run as Wagner’s Law suggests.
Abstract
This paper examines the validity of Wagner’s Law of long-run causal relationship between national income and public expenditure for Nigeria over the period 1970-2008. Deploying modern advances in Econometric techniques, such as the autoregressive distributed lag (ARDL) bounds testing approach to cointegration,vector error-correction method (VECM) and the standard Granger causality test, we found strong support forWagner’s longrun postulate of causal relationship from national income to public expenditure in Nigeria. However, we also found that there is a short run causal relationship running from public expenditure to national income in Nigeria, in validation of Keynesian theory. The policy implication of our findings is that public expenditure still remains a veritable short run instrument that could be utilized to stimulate economic growth in Nigeria, since national income does not explain short run changes in public expenditure in the country, except in the long run as Wagner’s Law suggests.
참고문헌 (45)
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