Fiscal Decentralisation and Economic Development in Nigeria: Empirical Evidence from VECM Mode

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Adefeso, H.
Saibu, O.
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This study examines the long-run and causal relationship between fiscal decentralization and economic development in Nigeria using annual data from 1970-2011. Both sub-national expenditures ratio and sub-national revenue ratio were used to measure fiscal decentralization in Nigeria. The result of the analysis showed that the federally allocated expenditures to sub-national have been greater than its corresponding allocated revenue in Nigeria and this has become pronounced from the year 1999 up till date under the administration of a dominant political party known as the People Democratic Party (PDP) in Nigeria. Using VECM, the study found that fiscal decentralization is cointegrated with economic development in Nigeria. That is, there is a long-run relationship between fiscal decentralization and economic development. The results from the VEC Granger causality test showed a unidirectional causality running from economic development to fiscal decentralization i.e. economic development granger causes fiscal decentralization (only sub-national revenue decentralization ratio) in Nigeria. By implication, economic benefits derived from fiscal decentralization are the products of economic development simply because as the economy is developing, these benefits emerge in Nigeria
Scholarly articles
Economic development , Cointegration , Fiscal decentralisation , VECM , Research Subject Categories::SOCIAL SCIENCES::Business and economics::Economics
Adefeso H.A and Saibu M.O (2014). Fiscal Decentralization and Economic Development in Nigeria: Empirical Evidence from VECM Model ACTA UNIVERSITATIS DANUBIUS AUDŒ, Vol. 10, no. 2, pp. 160-167