Public Spending and Economic Growth : The Role of Institutional Quality

Abstract

The study examined the effect of institutional quality on the relationship between public spending and economic growth in Nigeria. Annual data for the period 1986 to 2016 were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, World Development Indicators and the International Country Risk Guide using the autoregressive distributed lag (ARDL) Bound testing approach.The long run estimates revealed that corruption affects the relationship between capital expenditure and economic growth while it has negative but significant impact on the relationship between recurrent expenditure and economic growth. Democratic accountability has a negative and significant effect on the relationship between the capital expenditure and economic growth but a positive and significant relationship between recurrent expenditure and economic growth. Similarly, law and order has negative and significant effect on the relationship between recurrent expenditure and economic growth while it has positive relationship with capital expenditure and growth.