Title: A reconsideration of Wagner's hypothesis for Nigeria using linear and nonlinear ARDL methods

Authors: Isiaka Akande Raifu; Alarudeen Aminu

Addresses: Department of Economics, Faculty of Economics and Management Sciences, University of Ibadan, Ibadan, Oyo State, Nigeria ' Department of Economics, Faculty of Economics and Management Sciences, University of Ibadan, Ibadan, Oyo State, Nigeria

Abstract: This study examines the validity of symmetric and asymmetric Wagner's hypothesis for Nigeria using a dataset that spans the period from 1981 to 2016. Five versions of Wagner's hypothesis are specified and estimated with both the linear and nonlinear ARDL techniques. It is found that symmetric Wagner's hypothesis only holds in two of the versions (Peacock and Wiseman, 1961; Goffman, 1968). Only short-run asymmetric relationship exists between government expenditure and economic growth. However, cointegration exists between government expenditure and economic growth using linear and nonlinear ARDL. Granger-causality test supports Wagner's law while Toda-Yamamoto causality test produces mixed results. It is recommended that government may need to implement growth-promoting and sustainable expenditure policies so that a steady positive relationship can be established continuously between government expenditure and economic growth from the short to the long run.

Keywords: Wagner's law; government expenditure; economic growth; ARDL; autoregressive distribution lag; NARDL; Nigeria.

DOI: 10.1504/IJSE.2020.112308

International Journal of Sustainable Economy, 2020 Vol.12 No.4, pp.321 - 343

Received: 16 Dec 2019
Accepted: 05 Jun 2020
Published online: 07 Jan 2021 *

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