A Re-Examination of The Twin Deficit Phenomenon in the Nigerian Economy
Abstract:
This study examines the twin deficit hypothesis for the Nigerian economy, an oil dependent economy, for the period 1970 to 2010 by looking at the long run relationship between budget deficit and current account deficit and the direction of causality. The study employed the Johansen Co-integration method and the multivariate Granger causality test to examine this relationship. In conformity with theoretical considerations, the analysis of the study reveals that there is a positive long run relationship between the current account deficit and the budget deficit; however, in the short run, weak evidence that these deficits are closely linked was found and causality runs from current account deficit to budget deficit (reverse causality). Policy-makers are advised to diversify the export base of the economy implement policies that will enhance the external sector. It is only through this means that fiscal consolidation can produce meaningful result.ORDER COMPLETE MATERIAL (CHAPTER 1-5)
