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The Effect of Budget Deficit on Investment in Nigeria: An Empirical Study

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  • Adeniyi Jimmy Adedokun

Abstract

This study empirically analyzes the long-run and short-run effects of budget deficit on investment in Nigeria for the period 1975-2010. Employing error correction model and cointegration regression, the study argues that budget deficit has a significant inverse relationship with investment both in the short run and long run. Hence, there is evidence of crowding-out effect on investment. It further establishes the claim of debt overhang in the long run. Moreover, despite the debt forgiveness received by Nigeria in 2005, the study fails to find convincing evidence of investment accelerator effect in Nigeria.

Suggested Citation

  • Adeniyi Jimmy Adedokun, 2014. "The Effect of Budget Deficit on Investment in Nigeria: An Empirical Study," The IUP Journal of Applied Economics, IUP Publications, vol. 0(2), pages 38-47, April.
    • Handle: RePEc:icf:icfjae:v:13:y:2014:i:2:p:38-47
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