Fiscal Decentralisation and Economic Development in Nigeria: Empirical Evidence from VECM Mode
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Date
2014
Authors
Adefeso, H.
Saibu, O.
Journal Title
Journal ISSN
Volume Title
Publisher
ACTA UNIVERSITATIS DANUBIUS
Abstract
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
Description
Scholarly articles
Keywords
Economic development , Cointegration , Fiscal decentralisation , VECM , Research Subject Categories::SOCIAL SCIENCES::Business and economics::Economics
Citation
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