Vector Error Correction Modelling of the Composition of Government Spending and the Real Exchange Rate in Nigeria
The main objective of this study has been to empirically investigate the relationship between government expenditure
and the Real Exchange Rate in Nigeria . Using data covering 1970 to 2010, the Vector Error Correction and Cointegration tests
results established a long run relationship among the components of government expenditure and the Real Exchange Rate. The
result showed that government investment has delivered more productivity gains in the non-tradable sector than in the tradable
sector, while an increase in government consumption increased the relative demand for non-tradable. The government should
thus shift attention to the expansion of the tradable sector.
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