Capital Expenditure and Gross Fixed Capital Formation: An Application of Auto Regression Distributive Lag (ARDL) Model

Abstract

This study examined the effect of capital expenditure on gross fixed capital formation in Nigeria using the Auto Regression Distributive Lag (ARDL). Gross fixed capital formation was modeled as a function of Capital Expenditure on Administration, Capital Expenditure on Economic Service, Capital Expenditure on Social Service and Capital Expenditure on Transfer Payment. The findings of the study confirm the expectation of the results and other empirical studies and therefore conclude that there is significant short and long-run relationship between public administration expenditure, economic services, social and community services on gross fixed capital formation in Nigeria. From the regression summary, the study concludes that there is significant relationship between capital expenditure and the gross fixed capital formation in Nigeria. The study recommended that public capital expenditure significantly affect the growth of Nigerian gross fixed capital formation positively. That public expenditure should be increase and directed toward the productive sector of the economy. Full implementation will expand the positive impact of public expenditure on the growth of Nigerian gross fixed capital formation positively; we recommend that the capital expenditure should wholly be implemented to avoid scarcity of financial resources in the economy.

Keywords

References