TABLE OF CONTENTS
Title Page
Certification
Approval Page
Dedication
Acknowledgement
Table of Contents
List of Figures
List of Tables
Abstract
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Research Questions
1.4 Objectives of the Study
1.5 Hypotheses of the Study
1.6 Policy Relevance of the Study
1.7 Scope of the study
1.8 Conceptual Framework
1.9 Structure of the Study
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Review of Theoretical Literature
2.1.1 Budget Deficits, Crowding In and Crowding Out Effects Schools of Thought
2.2 Thematic Issues
2.2.1 Budget Deficits in Ghana: An Overview
2.2.2 Determinants of Budget Deficit Growth in Ghana
2.2.3 Fiscal Policy in Ghana
2.2.4 Interest Rate Policy in Ghana
2.2.5 Fiscal Policy in Nigeria
2.2.6 Macroeconomic Environments & Analytical Comparison between Nigeria & Ghana
2.3 Empirical Literature
2.3.1 International Evidence
2.3.2 Nigerian–Ghanaian Evidence
2.4 Limitation of Previous Studies and Value-To-Be-Added
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Theoretical Framework
3.2 Model Specification
3.3 Estimation Procedure
3.3.1 Empirical Models: Seemingly Unrelated Regression (SUR)
3.3.1.1 Two Stage Least Squares and Instrumental Variables
3.3.2 Lag/Length/Bandwidth Selection
3.3.3 Stationarity/Unit Rood Test
3.3.4 Cointegration Test
3.4 Model Justification
3.5 Data Sources
3.6 Econometric Software for Analyses
CHAPTER FOUR: DATA ANALYSES AND EMPIRICAL RESULTS
4.1 Presentation of Results
4.1.1 Presentation of Nigerian Data
4.1.1.1 Descriptive Statistics for all Variables
4.1.1.2 Analysis of the Correlation Matrix
4.1.2 Presentation of Ghanaian Data
4.1.2.1 Descriptive Statistics for all Variables
4.1.2.2 Analysis of the Correlation Matrix
4.2 Stationary (Unit Root) Tests Results
4.2.1 Lag Length/Bandwidth Selections
4.3 Cointegration Tests
4.4 Analysis of the SUR Models and Two-Stage Least Squares Estimation Results
4.4.1 Analysis of the SUR Estimation based on Economic Criteria
4.4.2 Analysis of the SUR Results based on Statistical Criteria
4.4.3 Analysis of the SUR Estimation based on Econometric Criteria
4.4.3.1 Autocorrelation
4.4.3.2 Other Diagnostic Tests
4.4.3.3 Functional Form Specification (Ramsey Reset) Test
4.5 Evaluation of Hypotheses
CHAPTER FIVE: SUMMARY, CONCLUSION AND POLICY IMPLICATIONS
5.1 Summary of Findings
5.2 Policy Implications of Findings
5.3 Policy Recommendations
5.4 Conclusion
REFERENCES
APPENDIX
ABSTRACT
This study investigates the effects of budget deficits on selected macroeconomic variables in Nigeria and Ghana using annual time-series data of both economies covering from 1970 to 2013; and taking previous empirical studies as its point of departure. The specific objectives of the study include: to examine the effects of budget deficits on interest rates, inflation, and economic growth in Nigeria and Ghana within the methodological framework of Seemingly Unrelated Regression (SUR) model and Two-Stage Least Squares (2SLS). The study employs Eagle-Granger Cointegration test, Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) tests in estimating the systems equations. Data sourced from World Bank, IMF - World Economic Outlook, Central Bank of Nigeria, Bank of Ghana and others, were analyzed using SUR model with several diagnostic and specification tests to examine the objectives of the study. From the perspective of this study, the empirical findings demonstrated that budget deficit has statistically negative effects on interest rate, inflation, and economic growth for both economies thereby supporting the neoclassical argument in the literature that budget deficit slows growth of the economy through resources crowding-out. Based on the empirical findings, many recommendations were made for both Nigeria and Ghana economies one of which stated that the government of Nigeria and Ghana should be mindful of the sources of financing the budget deficits so as to effectively manage the economic fluctuations and increase activities in the real sector. Also, it was recommended that both economies should pursue policies that will boost production of goods for both domestic consumption and exports in the long run through a combination of import substitution and export promotion strategies.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Budget deficit and its effects on macroeconomic variables is one of the most discussed issues amongst economists and policy makers in both developed and developing countries (Saleh, 2003; Aisen & Hauner, 2008; Georgantopoulos & Tsamis, 2011). Intuitively, it is a commonplace to construe that huge budget deficits have adverse macroeconomic effects such as high interest rates, current account deficits, inflation, exchange rates volatility, with implications on growth and development (Bernheim, 1989).
The budget deficit effects could either be negative, positive or a no positive or negative relationship on macroeconomic variables. Budget deficit and its effects on any given economy could be attributable to different methodologies countries employed and the nature of data used by different researchers as most of the studies regress the macroeconomic variable(s) on the fiscal deficit or the deficit on the macroeconomic variable(s)(Anyanwu, 1997).
Budget deficit refers to government expenditure exceeding government revenue over a period of time (Anyanwu, 1997). When a deficit occurs in a country, it becomesimperative to find remedy for financing such deficits so as to eradicate its negative implications. Nigeria and Ghana as a developing economies have blamed prolonged economic crisis as one of the major causes of budget deficit(s) in both economies as it has resulted in over indebtedness and debt crisis, high inflation, poor investment performance and growth (Ezeabasili, Mojekwu & Herbert, 2012). In Nigeria, public expenditure has led to increase in the fiscal imbalances that siphon funds from the private sector investment, retarding growth and reducing standard of living (Mpia & Ogrike, 2014). Fiscal imbalances create potential large....
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