Fiscal Synchronisation or Institutional Separation: An Examination of Tax-Spend Hypothesis in Nigeria

Dauda Olalekan YINUSA^1, and Adebayo ADEDOKUN¹

¹Department of Economics, Obafemi Awolowo University, Nigeria

Cite this paper:
Dauda Olalekan YINUSA and Adebayo ADEDOKUN. Fiscal Synchronisation or Institutional Separation: An Examination of Tax-Spend Hypothesis in Nigeria. Journal of Finance and Accounting. 2017; 5(3):80-87. doi: 10.12691/jfa-5-3-2

Abstract

This paper investigates the position of Nigeria within the various fiscal hypotheses (tax-spend, spend-tax, fiscal synchronization and fiscal neutrality hypotheses) using Granger Causality and Block Exogeneity Wald Test within the framework of Vector Error Correction (VEC) Model. The study established one-directional causality that runs from revenue to expenditure (Tax-Spend Hypothesis). This suggests that current government effort at increasing tax revenue is a positive development to reduce or revert the economy from fiscal deficit path. By implication the ongoing government policy towards increase tax revenue and her decision to halt fiscal leakages would sail the economy through the current fiscal crises that are motivated by global crash in the price of crude oil.

Keywords:
revenue and expenditure tax-spend hypothesis Nigeria fiscal system

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