IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-13-00775.html
   My bibliography  Save this article

The tax-spend nexus in Nigeria: Evidence from Nonlinear Causality

Author

Listed:
  • Olalekan Bashir Aworinde

    (Tai Solarin University of Education, Nigeria & University of Bath, UK.)

Abstract

The study investigates the linear and nonlinear causal linkages between the tax-spend nexus in Nigeria for the periods 1961-1992, 1993-2012 and1961-2012. Employing a nonparametric causality test of Diks and Panchenko (2006) as well as the parametric causality test using the VAR model, results show that there is evidence of uni-directional linear causality from government revenue to government expenditure in the first period and uni-directional nonlinear causality from government revenue to government expenditure in the second and third periods. However, the nonlinear causal relation evidence that government revenue Granger cause government expenditure disappears after the VAR filtering. The policy implication of this result is that government should intensify efforts to improve her revenue accompanied with appropriate fiscal expenditure reforms.

Suggested Citation

  • Olalekan Bashir Aworinde, 2013. "The tax-spend nexus in Nigeria: Evidence from Nonlinear Causality," Economics Bulletin, AccessEcon, vol. 33(4), pages 3117-3130.
    • Handle: RePEc:ebl:ecbull:eb-13-00775
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I4-P290.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    2. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    3. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-560, August.
    4. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
    5. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    6. Bekiros, Stelios D. & Diks, Cees G.H., 2008. "The relationship between crude oil spot and futures prices: Cointegration, linear and nonlinear causality," Energy Economics, Elsevier, vol. 30(5), pages 2673-2685, September.
    7. Diks, Cees & Panchenko, Valentyn, 2006. "A new statistic and practical guidelines for nonparametric Granger causality testing," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1647-1669.
    8. Bradley T. Ewing & James E. Payne & Mark A. Thompson & Omar M. Al-Zoubi, 2006. "Government Expenditures and Revenues: Evidence from Asymmetric Modeling," Southern Economic Journal, John Wiley & Sons, vol. 73(1), pages 190-200, July.
    9. Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 45-59, January.
    10. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    11. Edward Ghartey, 2010. "Cointegration and Causal Relationship between Taxes and Spending for Kenya, Nigeria and South Africa," International Economic Journal, Taylor & Francis Journals, vol. 24(2), pages 267-282.
    12. Magazzino, Cosimo, 2013. "Revenue and expenditure nexus: A case study of ECOWAS," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 7, pages 1-27.
    13. DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, vol. 60(2), pages 423-433, March.
    14. Hiemstra, Craig & Jones, Jonathan D, 1994. "Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation," Journal of Finance, American Finance Association, vol. 49(5), pages 1639-1664, December.
    15. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-193, January.
    16. Abdulnasser Hatemi-J, 2008. "Tests for cointegration with two unknown regime shifts with an application to financial market integration," Empirical Economics, Springer, vol. 35(3), pages 497-505, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    2. Aminu, Alarudeen & Raifu, Isiaka Akande, 2018. "Dynamic Nexus between Government Revenues and Expenditures in Nigeria: Evidence from Asymmetric Causality and Cointegration Methods," MPRA Paper 97880, University Library of Munich, Germany.
    3. Olumuyiwa Ganiyu Yinusa & Olalekan Bashir Aworinde & Isiaq Olasunkanmi Oseni, 2017. "The Revenue-Expenditure Nexus in Nigeria: Assymetric Cointegration Approach," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 15(1), pages 47-61.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olumuyiwa Ganiyu Yinusa & Olalekan Bashir Aworinde & Isiaq Olasunkanmi Oseni, 2017. "The Revenue-Expenditure Nexus in Nigeria: Assymetric Cointegration Approach," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 15(1), pages 47-61.
    2. Aye, Goodness C. & Chang, Tsangyao & Gupta, Rangan, 2016. "Is gold an inflation-hedge? Evidence from an interrupted Markov-switching cointegration model," Resources Policy, Elsevier, vol. 48(C), pages 77-84.
    3. Pinar Evrim-Mandaci & Hakan Kahyaoglu & Efe Caglar Cagli, 2011. "Stock and bond market interactions with two regime shifts: evidence from Turkey," Applied Financial Economics, Taylor & Francis Journals, vol. 21(18), pages 1355-1368.
    4. Luis F. Martins & Paulo M. M. Rodrigues, 2022. "Tests for segmented cointegration: an application to US governments budgets," Empirical Economics, Springer, vol. 63(2), pages 567-600, August.
    5. Vicente Esteve & Juan Sanchis, "undated". "Estimating the substitutability between private and public consumption: the case of Spain, 1960- 2001," Studies on the Spanish Economy 161, FEDEA.
    6. Vicente Esteve, 2004. "Política fiscal y productividad del trabajo en la economía española: un análisis de series temporales," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 19(1), pages 3-29, June.
    7. Shahbaz, Muhammad & Haouas, Ilham & SBIA, Rashid & Ozturk, Ilhan, 2018. "Financial Development-Environmental Degradation Nexus in the United Arab Emirates: The Importance of Growth, Globalization and Structural Breaks," MPRA Paper 87365, University Library of Munich, Germany, revised 11 Jun 2018.
    8. Paleologou, Suzanna-Maria, 2013. "Asymmetries in the revenue–expenditure nexus: A tale of three countries," Economic Modelling, Elsevier, vol. 30(C), pages 52-60.
    9. Lee, Chien-Chiang & Chien, Mei-Se, 2008. "Structural breaks, tourism development, and economic growth: Evidence from Taiwan," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 77(4), pages 358-368.
    10. Luciano Gutierrez, 2005. "Tests for cointegration in panels with regime shifts," Econometrics 0505007, University Library of Munich, Germany.
    11. Marco Morales, 2014. "Cointegration testing under structural change: reducing size distortions and improving power of residual based tests," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 23(2), pages 265-282, June.
    12. Emilio Congregado & Antonio Golpe & André Stel, 2014. "The role of scale economies in determining firm size in modern economies," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(2), pages 431-455, March.
    13. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    14. Tang, Chor Foon, 2011. "Tourism, real output and real effective exchange rate in Malaysia: a view from rolling sub-samples," MPRA Paper 29379, University Library of Munich, Germany.
    15. Dilem Yıldırım & Onur A. Koska, 2018. "Puzzling out the Feldstein-Horioka Paradox for Turkey by a Time-Varying Parameter Approach," ERC Working Papers 1808, ERC - Economic Research Center, Middle East Technical University, revised Apr 2018.
    16. Esteve, Vicente & Navarro-Ibáñez, Manuel & Prats, María A., 2013. "The Spanish term structure of interest rates revisited: Cointegration with multiple structural breaks, 1974–2010," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 24-34.
    17. Ramzi Issa & Robert Lafrance & John Murray, 2008. "The turning black tide: energy prices and the Canadian dollar," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 737-759, August.
    18. Camarero, Mariam & Carrion-i-Silvestre, Josep Lluís & Tamarit, Cecilio, 2013. "Global imbalances and the intertemporal external budget constraint: A multicointegration approach," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5357-5372.
    19. Fantazzini, Dean & Toktamysova, Zhamal, 2015. "Forecasting German car sales using Google data and multivariate models," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 97-135.
    20. Vicente German-Soto & Chapa Cantú, 2015. "Cointegration with structural changes between per capita product and income inequality in Mexico," Applied Economics, Taylor & Francis Journals, vol. 47(49), pages 5215-5228, October.

    More about this item

    Keywords

    Expenditure; Revenue; nonlinear causality; Nigeria;
    All these keywords.

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-13-00775. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.