Effects of budget deficits on the current account balance in Nigeria: A simulation exercise
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Date
1997-11
Authors
Egwaikhide, Festus O
Journal Title
Journal ISSN
Volume Title
Publisher
AERC
Abstract
This paper examines the effect of budget deficit on the current account balance in Nigeria, covering the period from 1973 to 1993. This is motivated by the fact that the magnitude of government has increased with amazing rapidity since the early 1 980s. Simultaneously, the current account balance recorded deficits, to the extent that there is a high correspondence between these variables. A macroeconomic model that captures the salient interrelationships between government budgetary developments, credit creation and the current account balance is constructed. Quantitative evidence suggests that budget policy affects the current account balance in Nigeria. In particular, simulation experiments show that budget deficit, engendered by increased expenditure, leads to a deterioration of the current account, whether it is financed through bank credit or external borrowing. It is argued that budget discipline is necessary for the achievement of external balance in Nigeria.
Description
HJ 2184.7 E348 1997
Keywords
Budget Deficits - Nigeria , Balance of Payments- Nigeria , Nigeria - Economic conditions - 1970