Is Wagner’s Law a Myth or a Reality? Empirical Evidence from Nigeria (Published)
This study attempted to examine the long-run relationship and direction of causality between economic growth and government spending with consideration for exchange rate, consumer prices and monetary policy rate. This is with a view to determine the validity of Wagner’s law in Nigeria during the period 1961 to 2011. Times series data on variables such as real GDP, government expenditure, exchange rate, inflation rate and monetary policy rate during the period (1961-2011) were used. These data were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin 2011 Edition; World Development Indicator (WDI) Latest version and Federal Ministry of Finance. The study identified the order of integration of the variables used in the study using Phillips-Perron unit root test. The test was conducted with a drift and Time trend. The study also employed Johansen multivariate cointegration tests to determine if a group of I(1) variables converge to a long-run equilibrium. Vector Error Correction Mechanism was employed to model causal relation between economic growth and government spending. The results showed that variables are individually integrated of order one that is, a I(1) process. Johansen multivariate cointegration test showed that variables are cointegrated. Both the Trace test and Maximum-Eigen test suggest one cointegrating vector. The result of VECM estimates provided evidence in support of long-run causality running from real GDP to government spending. However, while evidence exists for long-run causality running from real GDP to government spending such evidence does not exist for short-run causality in this same direction. This indicates that Wagner’s Law is supported only in the long-run. The study therefore concludes that Wagner’s law is never a Myth but a Reality in Nigeria over the sample period.
Keywords: Cointegration, Government spending, Long-run causality, Short-run causality., economic growth
Small and Medium Scale Enterprises and Economic Growth in Nigeria (Review Completed - Accepted)
ABSTRACT
The study empirically evaluates the impact of small and medium scale enterprises on the growth of the Nigerian economy using the error correction method (ECM). The study adopted annual times series data for Nigeria spanning a period of 43 years (1970 to 2012). The finding of our results suggests that the theoretical modeling requirements for all the variables used in the regression satisfy the statistical requirements that determine the choice of the statistical model. The result from the estimated model shows that both human capital development (HCD) and bank loans to small and medium scale enterprises (BLSME) were statistically significant as well as positively influence the growth of the Nigerian economy. Therefore, more concerted effort should be employed by government at all level to make training and retraining of their man–power both in public and private sectors to acquire the necessary skills required in modern business technique. This will boost their efficiency and productivity as well as bolster its share in the growth of the country’s economy. In the light of the foregoing, we recommend that government at all level should provide incentives and favourable business environment for SMEs to flourish. It should also sustain the current ongoing reforms in the sector to stimulate productivity as well as the continuous enlightenment campaign by the Central Bank of Nigeria, banking industries, relevant government ministries and agencies while indigenous entrepreneurs must be ready to show greater desire to institutionalize and separate company from self and be ready to be helped
Keywords: Error correction method, SMEs, Stability, economic growth