Re-examining the Wagner's law versus Keynesian hypothesis: evidence from Nigeria

Abstract

This study investigates the Keynesian and Wagnerian views on public expenditure and economic growth in Nigeria using annual secondary data spanning from 1980 to 2011 obtained from the Central bank of Nigeria (CBN) statistical bulletins. The Augmented Dickey-Fuller (ADF), Johansen Cointegration and Granger Causality econometric methodologies were used in this study. The Johansen Cointegration test revealed the presence of a long-run cointegrated relationship between government expenditure (capital expenditure and recurrent expenditure) and economic growth (GDP) in Nigeria. The Granger Causality test found no mutual correlation between government expenditure (capital expenditure and recurrent expenditure) and economic growth (GDP) using the benchmark of 5% level of statistical significance. The findings of this study therefore indicate the non-existence of both Wagner's Law and Keynesian Hypothesis on public expenditure and economic growth in Nigeria during the period under review.