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Modelling the Behaviour of Government Spending and Economic Growth in Six ECOWAS Countries (1981-2013)
International Journal of Economics, Finance and Management Sciences
Volume 5, Issue 1, February 2017, Pages: 34-56
Received: Aug. 12, 2016; Accepted: Aug. 22, 2016; Published: Jan. 4, 2017
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Author
Matthew Abiodun Dada, Department of Economics and Business Studies, College of Social and Management Sciences Wellspring University, Benin City, Nigeria
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Abstract
This study examined the behaviour of government spending and economic growth in six ECOWAS countries using ARDL and UVAR-based modified granger non-causality approach. Secondary data covering1981-2013 were sourced on key variables from (WDIs) 2014 edition. The result of Johansen and ARDL bound test suggests a long run equilibrium relationship between government spending and economic growth in all the six countries. The result of the modified ARDL indicates that variables adjust to a long run equilibrium path after a short run deviation. The ECM coefficient is negatively signed and significant at 5 and even at 1 percent in line with a priori expectation. This provides strong support for the long run equilibrium relationship. However, the speed of adjustment to long run equilibrium path varies across the six countries. The causality test result suggests that bidirectional causality exists for Gambia, Cote d’Ivoire, Senegal and Burkina Faso while unidirectional causality running from economic growth to government spending was found for Nigeria and Ghana. There is no support for the feedback hypothesis. Policy makers in this region are enjoined to caution on the call for fiscal consolidation but rather consider the fiscal space alternative to advance the developing economies in this sub-region. The study therefore concluded that there is a cause-effect relationship between government spending among other variables and economic growth in the developing ECOWAS countries.
Keywords
Government Spending, Economic Growth, ARDL Bound Test, Toda and Yamamoto Modified Granger Non-causality, Error Correction Models, ECOWAS Countries
To cite this article
Matthew Abiodun Dada, Modelling the Behaviour of Government Spending and Economic Growth in Six ECOWAS Countries (1981-2013), International Journal of Economics, Finance and Management Sciences. Vol. 5, No. 1, 2017, pp. 34-56. doi: 10.11648/j.ijefm.20170501.14
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Copyright © 2017 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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