Abstract: This research aims at investigating the true impact of budget deficit (BD) on economic growth of Nigeria which is proxied by the real gross domestic product (RGDP). This study employed both theoretical and empirical approaches to determine the effectiveness of fiscal deficits in expanding the level of economic activity. The sample taken for the current study comprises of time-series considering period of 1970-2011. Regression analysis using Ordinary least squares (OLS) is conducted to ascertain the impact of BD on the RGDP, and the result showed a positive impact of budget deficit on the economic growth. This following the Keynesian theory implies that government budget deficit if invested in the production of public capital goods results in an increase in growth through the crowding-in effect of private investment. The study therefore recommends that where fiscal deficits are necessary in correcting economic cycles, such deficits should have target investments that are self-sustaining and through which, significant levels of investment and development in the economy can be enhanced. Furthermore, curbing corruption, an important source of fiscal deficits in Nigeria, will help to reduce the deficits and ensure prudent management of national resources.
Keywords: Budget Deficit, Keynesian Theory, Crowding-In Effect.
Title: An Empirical Analysis of the Impact of Budget Deficit on Economic Growth in Nigeria (1970-2011)
Author: Frederick Ijeoma Joy, Ume Chukwuma Otum, Osuagwu, Queen Onyekachi
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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