Deficit Financing and Economic Growth: An Autoregressive Distributed Lag Approach

Solawon, Modupeoluwa Deborah; Adekunle, Oludayo Elijah

doi:10.2139/ssrn.3419752

SSRN Journal

2018

DOI: 10.2139/ssrn.3419752

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Deficit Financing and Economic Growth: An Autoregressive Distributed Lag Approach

Modupeoluwa Deborah Solawon

Oludayo Elijah Adekunle

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2021

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“…This result confirmed an earlier study on Nigeria (Ezeabasili and Tsegba 2012). However, on the same economy of Nigeria, Solawon and Adekunle (2018), based on Autoregressive Distributed Lag Model with time series data spanning 1986-2016, established that fiscal deficit has no significant effect on growth. Also in the case of Ghana, Alagidede et al (2018) argue based on time series data spanning 1967-2013 that fiscal deficit is adverse to growth and is statistically significant when it surges above the optimal deficit threshold of 7.6 percent.…”

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confidence: 99%

The Mediating Effect of Money Growth And General Public Consumption In The Fiscal Deficit-Inflation-Growth Nexus of The West African Monetary Zone: A Multilevel Structural Model Approach

Ayesu¹,

Olaomi²

2021

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The effect of fiscal deficit on inflation and growth, has been a highly contested issue in economics. Studies on the issue generally have sought to ascertain whether deficit in the fiscal balance has positive or negative effect on inflation and/or growth, neglecting the question of mediating variables in the process. In this study, we consider the consequences of selected mediating variables, money growth and general public consumption, in the context of the relationship among fiscal deficit, inflation and growth in the case of the West African Monetary Zone. The study is based on Multilevel Structural Model (1, 1, 1) within the framework of dynamic structural equation model. We found that when the relationship between inflation and fiscal deficit is mediated by growth of money, it does not show any statistical credibility, thus, member-countries are not prone to finance deficits by expanding growth of money. On the other hand, general public consumption is a statistically credible mediator between fiscal deficit and growth, but its effect is negative on growth. This implies that increased general public consumption occasioned by increased fiscal deficit is counter-productive to growth outcomes in the sub-region.

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confidence: 99%

The Mediating Effect of Money Growth And General Public Consumption In The Fiscal Deficit-Inflation-Growth Nexus of The West African Monetary Zone: A Multilevel Structural Model Approach

Ayesu¹,

Olaomi²

2021

Preprint

View full text Add to dashboard Cite

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Deficit Financing and Economic Growth: An Autoregressive Distributed Lag Approach

Cited by 1 publication

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The Mediating Effect of Money Growth And General Public Consumption In The Fiscal Deficit-Inflation-Growth Nexus of The West African Monetary Zone: A Multilevel Structural Model Approach

The Mediating Effect of Money Growth And General Public Consumption In The Fiscal Deficit-Inflation-Growth Nexus of The West African Monetary Zone: A Multilevel Structural Model Approach

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