DEFICIT FINANCE IN DEVELOPING COUNTRIES (LDCs): A TIME SERIES DATA EVIDENCE FOR NIGERIA
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Abstract
This paper conducted a study on deficits finance in Nigeria using time series data spanning 19S6 to 200S. Over the years government size has been rising without a corresponding increase in revenue generation. This has led to growing national debt burden and deficit finance. The paper investigated the influence of deficits finance on macroeconomic variables like unemployment, inflation, gross fixed capital formation and gross domestic product in Nigeria. The analysis was carried out with a three stage least square (3STLS) technique. The findings showed a significant positive effect of deficits finance on unemployment and gross fixed capital formation but a negative influence on inflation and gross domestic product. The general influence reflects a negative impact on economic growth. This analysis has some policy implications for Nigeria. The continuous financing of the Nigeria economy with deficit finance is detrimental to economic growth and this can become a drag on the economy. Deficits finance can deepen debt burden and retard growth performance of the private sector.