Revista Internacional de Economia e Ciências de Gestão

Nigeria Economic Recess versus Wagner’s Law and Keynesian Proposition

Abstract

Adebayo Adedokun and Clement Olalekan Olaniyi

This study is a follow-up on effectiveness of government strategies to redress the current Nigeria economic recess. Specifically, the study examined the adequacy of public expenditure led approaches to retract the negative growth of national income. In order to achieve this, the paper examines the validity of Wagner’s law and Keynesian proposition in Nigeria using Toda and Yamamoto and Dolado and Lutkepohl (TYDL) approaches to causality within the frameworks of augmented VAR and Block Exogeneity Wald test. The study employed aggregate and disaggregated government expenditure under six different sub divisions. The results show that five of the six pairs of the expenditure components, which includes, total government expenditure, capital expenditure, expenditure on economic activities, expenditure on general administration and expenditure on agriculture support Wagner’s law, only expenditure on agriculture supports Keynesian proposition on bidirectional causality while no causality is found for recurrent expenditure. It is therefore evidenced that Wagner’s law is strongly supported in Nigeria, thus suggests that private sector led approach would be more appropriate for Nigeria economic recovery than the current expansionary fiscal policy approach of the government.