The cookie sets a unique anonymous ID for a website visitor. Depends on the situation of the economy. In contrast, the Trump Administration forecasts the budget deficit being 1.5 percent of GDP in 2028 and 0.6 percent of GDP in 2029. gives rise to a budget deficit which poses a challenge to the long-term growth of any economy due to its effects such as: rising inflation, currency devaluation, declining gross domestic product and fiscal adjustment (Kelikume, 2016). However, if austerity measures cause lower economic growth, the government will also see a fall in cyclical tax revenues. Academia.edu no longer supports Internet Explorer. That's because government spending drives economic growth. The Prob>z shows that at ten per cent (10%) significant level, the probability level is 0.103. A fiscal expansion may lead to an increase in real interest rate, which in turn crowd out private investment but stimulate private savings. Helps users identify the users and lets the users use twitter related features from the webpage they are visiting. This cookie is used to collect statistical data related to the user website visit such as the number of visits, average time spent on the website and what pages have been loaded. The modeling of underlying variables (Inflation, Gross Domestic Product, Budget Deficit, Gross Based on its outward-oriented development strategy, respectable growth, increased integration into world trade and financial markets, and imperfect though vibrant and wide-based democracy, Turkey is often cited as a development model for other countries in the region and elsewhere. 2005; 50(2): 211243. 2017; 12(2). Sorry, preview is currently unavailable. The modeling of underlying variables (Inflation, Gross Domestic Product, Real Interest Rate, Gross Investment, Real Exchange Rate) to estimate the quantitative effect of continued budget deficit on the rate of economic growth, governance and development. Author came to conclusions that deficit do not cause high, inflation through monetary expansion; deficit has a negative relationship with real output, growth rate; and increased deficit do appear to slow down investment usually after one or two, years. Ramu & Gayithri [26] examined the long run and short run relationship between budget deficit and economic growth in India. Several studies have been conducted on the relationship between budget deficit and economic growth. A budget deficit occurs when the government's tax revenues are less than its spending for a particular year. . This paper investigates the sustainability and welfare effects of government budget deficits by using a simple endogenous growth model with overlapping generations. Cinar, Eroglu, & Demirel [11] examined the effect of budget deficit policies on economic growth. Pesaran, M. H., Shin, Y., & Smith, R. J. Bounds testing approaches to the analysis of level relationships. Journal of Political Economy. You can download the paper by clicking the button above. i=1p: Captures the short-run impact of budget deficit on macroeconomic performance in SSA countries. 1. The study revealed that fiscal deficit has a negative impact on economic growth. The Keynesians stated that increasing budget deficit will lead to an increase in aggregate demand and improve investors confidence on the economys potential, thereby fostering investments and aggregate savings which results in economic growth in the long run. International Journal of Economics and Finance, 5(3), 91-101. During this period, economic growth is high. This concludes the topic of budget deficit, which is one of the metrics of measuring the economic growth of a nation along with GDP. This cookie is used to provide the visitor with relevant content and advertisement. To browse Academia.edu and the wider internet faster and more securely, please take a few seconds toupgrade your browser. The impact of the budget deficit on economic growth is theoretically explained through the, effect of the deficit on the flow of money into the economy and through the supply side, (infrastructure, education, etc). International Journal of Business and Social Science Vol. The root of the key discussion results from theoretically controversial views between Keynesian economists and Neoclassical economists. Effects of Budget Deficit . which tax changes affect economic growth, revenues, and other factors. 3. 22. Furthermore, Government should reduce the overall recurrent expenditure as it will help to mitigate the problem of budget deficit that leads to debt accumulation in SSA countries and increase expenditure on developmental projects. Some factors that are thought to influence changes in the government budget deficit are the rate of economic growth, inflation and exchange rates. This is where the dynamic analyses of tax planslike those previously conducted using the Tax Foundations Taxes and Growth Modelare particularly handy. The cookie is set by CasaleMedia. It also helps in load balancing. Now, his business had a $500,000 budget deficit ($900,000 - $400,000). Ubi, P., & Inyang, J. It forces the government to have more control on . This leads to an accumulation of public sector debt. The results suggest that higher budget deficit crowd out, domestic investment and increase trade deficit. Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet. Journal of Economic and Sustainable Developement. Still, over 700 million people around the world continued to live in extreme poverty in 2015. The study employed time series annual data spanning from 1966 to 2015. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. Also, the SSA region witnessed mixed and most of the times, low annual growth during the review periods. That is, a one per cent increase in budget deficit will lead to an increase in economic growth by 0.001 per cent. 2018; 6(5): 137150. Efuntade, O.O. Depends on the situation of the economy. Iqbal, N., ud Din, M., & Ghani, E. The Fiscal Deficit and Economic Growth in Pakistan: New Evidence. A reduction in budget deficit below this limit, not only no longer, produces positive effects on economic growth, but can also actually be detrimental if the, reduction is due to a significant fiscal contraction. Why Keynes . Google Scholar. Fiscal deficit and economic growth in Nigeria: Ascertaining a Feasible Threshold. To read more of such interesting concepts on economics for class 12, stay tuned to our website. The study found that fiscal deficit had a significant growth impact during the military regime, while it has not had a significant impact on economic growth during the democratic regime. An individual runs a deficit if they spend more money than what they earn in a month. This cookie is installed by Google Analytics. Log of real gross domestic product had the highest value of 11.67 and a lowest value of 8.33 whereas budget deficit has a maximum value of 21.80 and a minimum value of -557.50 respectively. This study therefore examines the long run and short run effect of budget deficit and economic growth in twenty SSA countries from 1991 to 2018 using the pooled mean group estimation technique. A budget deficit will occur if there is high government . Research Journal of Accounting and Finance. Job creation gives more people money to spend, which further boosts growth. Fiscal Deficit Impact on the Economy Long run: The result in table 3 shows that budget deficit as a percentage of GDP has a negative effect on economic growth in SSA countries. WASHINGTON - The national debt is $21 trillion and counting. This cookie is set by the provider Yahoo.com. Bank of Finland BOFIT Discussion Paper 03/2016, Nwakoby Clement Ndukaife Ikechukwu, Clement Nwakoby, IOSR Journal of Humanities and Social Science, Grace Ofori-Abebrese, Robert Becker Pickson, Economics, Commerce and Trade Management: An InternationalJournal (ECTIJ), Economics, Commerce and Trade Management: An International Journal (ECTIJ), At the Crossroad: Twin Deficits in the Asian Crisis-affected Countries, The Dynamics of Relationship between exports and economic growth in India, The Causality between Government Revenue and Government Expenditure in Iran, An Empirical Investigation of Budget and Trade Deficits: The Case of Bangladesh, TWIN DEFICITS OR RICARDIAN EQUIVALENCE HYPOTHESIS: EVIDENCE FROM NIGERIA. This is a Lijit Advertising Platform cookie. A Time-Series Analysis on Stationarity, Cointegration and Causality, Fiscal Policy, Consumption and Current Account in the European Countries, Romanian Journal of Fiscal Policy The Relationship between Government Expenditure and Poverty: A Cointegration Analysis, Ricardian Equivalence, Twin Deficits, and the Feldstein-Horioka puzzle in Egypt, TWIN DEFICITS OR RICARDIAN EQUIVALENCE HYPOTHESIS: EVIDENCE FROM NIGERIA, EMPIRICAL INVESTIGATION BETWEEN BUDGET DEFICIT, Investigating for Twin Deficits Hypothesis in South Africa, AN EMPIRICAL INVESTIGATION FOR THE TWIN DEFICITS HYPOTHESIS IN PAKISTAN, Two Deficits and Economic Growth: Case of CEE Countries in Transition, AN ASSESSMENT OF THE RELATIONSHIP BETWEEN BUDGET DEFICIT SYNDROME AND CONSUMER WELFARE IN NIGERIA, FISCAL POLICY AND SOCIAL WELFARE: ZELLNER'S MULTIVARIATE REGRESSION APPROACH, THE IMPACT OF GOVERNMENT SPENDING ON ECONOMIC GROWTH: THE CASE OF ETHIOPIA, Deficit Financing and the Growth of Nigeria Economy, DOES INCREASE IN DOMESTIC DEBT HAVE EFFECT ON PRIVATE INVESTORS IN NIGERIA, IMPART OF BUDGET DEFICIT ON ECONOMIC GROWTH IN NIGERIA (1980-2016), Exploring the budget deficit-economic growth nexus: new evidence from
Primarily through the supply side. The domain of this cookie is owned by Media Innovation group. 32. 29. Budget deficit is one of the economic problems facing both developed and developing countries/economies. Aero & Ogundipe [4] asserted that when government expenditure increases due to productive expenditure like education and health care, budget deficits can bring about economic growth in the long run. The findings showed that there is a short-run negative relationship between public debt and economic growth for the two groups of countries while the long-run estimation results showed budget deficit policies did not affect economic growth in Panel A and B. The main purpose of this cookie is advertising. In contrast, a budget surplus occurs when the government's tax revenues are greater than its spending for a particular year. This ID is used to continue to identify users across different sessions and track their activities on the website. 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