An Empirical Analysis Of The Impact Of Budget Deficit and Deficit Financing On The Performance Of Nigeria Economy:- Nwajiobi Praise O

ABSTRACT

This study investigated the effect of budget deficit and deficit financing pn the performance of \ Nigeria economy using times series data covering from 1981-2018; and takingprevious empirical studies as its'point ofdeparture. The specific objectives of the study is to evaluate the effect of budget deficit and deficit financing on the performance of Nigeria economy, i Within the methodological framework of OLS. The study employs augmented dickey fuller (ADF), Error correction model, Co-integration test. The variables used in the study include; budget deficit (BDF), outstanding debt ofthe Federal government (DMD), official exchange rate ofNaira to Any other currencies (EXCH), ratio of budget deficit to economic growth in Nigeria (BPT) as the explanatory variables and RGDP as the dependent variable. The Data on these variables were sourcedfrom the Central Bank ofNigeria (CBN) statistical bulletin volume 29, 2018. The unitroot result revealed that only BPT became stationary at levels, the other variables became stationary afterfirst differencing and second difference. The Johansen Cointegration test revealed that there is a long run relationship among the variables employed in the study. ECM was employed to correct all the disequilibrium in the data. The R2 shows that 95% ofthe changes in the dependent variable, are as a result ofthe changes in the explanatory variable. The result of(he BreuschGodfrey Serial Correlation LM Test shows that there is no serial correlation in the model.