The causal and cointegration relationship between government revenue and government expenditure

This study explores the relationship between bank credits, exchange rate and non-oil GDP in Azerbaijan, utilizing FMOLS, CCR and DOLS co-integration methods to the data spanning from January 2005 to January 2019. The results from the different co-integration methods are consistent with each other and approve the presence of a long-run relationship among the variables. Estimation results reveal that there is a positive and statistically significant impact of bank credits and exchange rate on the non-oil GDP in the long run for the Azerbaijani case which are in line with the expectations and with the theoretical findings discussed in theoretical framework section. This finding also indicates that a 1% increase in credit and real exchange rate increases non-oil GDP by 0.51% and 0.56%, respectively. The results of this paper are useful for the policymakers and promote the economic literature for further researches in the case of oil-rich countries.

Due to a huge financing gap in many developing nations, governments use budget deficit to facilitate growth and development. However, deficit financing deepens the economic woes of these economies, leaving them in a vicious cycle of deficits. In Nigeria, for instance, fiscal deficits cause country’s bad performance and ranking both in global growth and development indicators. Thus, the use of fiscal deficit to enhance economic performance has proved to be futile and also has left bad economic consequences. Based on the econometric method of Autoregressive Distributed Lag, this study examines how selected macroeconomic indicators influence fiscal deficits in the budgetary policy of Nigeria. Historical data between 1981 and 2017 were used for the study. The study shows a significant positive effect of inflation, oil revenue, and lagged exchange rate on fiscal deficits. There is also evidence that external debt and current exchange rate decrease the level of fiscal deficits. However, the research did not prove robust evidence of fiscal deficit persistence. Government policy should target low level of inflation and exchange rate appreciation as well as the productive investment of oil revenues and economic diversification as the panacea for persistent use of fiscal deficits.

This paper investigates the relationship of cryptocurrencies with four traditional assets: equity, fiat currencies, crude oil, and gold in Nigeria, Vietnam, the Philippines, Turkey, and Peru. According to Statista’s 2020 Cryptocurrency Adoption Survey, these five countries showed high levels of crypto usage and ownership. Emerging economies attract the attention of portfolio managers due to the high returns associated with assets originating from these countries. The paper explores the possibility of creating a multi-asset portfolio, including cryptocurrencies. Vector Autoregression Granger causality and Johansen Cointegration tests are conducted to study the relationship between each traditional asset and cryptocurrencies. The study period is from October 2017 to June 2021. The composite Crypto Index was created using the top seven cryptocurrencies based on market capitalization. The Granger Causality test results reveal no causality between Nigeria’s chosen traditional assets and the cryptocurrency index. In the case of the Philippines, there is a unidirectional causality relationship from crypto returns to currency returns; and gold returns to crypto index returns. In Vietnam, stock index returns cause crypto returns; in Peru, gold returns cause crypto returns; and in Turkey, crypto returns cause currency returns. None of the countries has exhibited a bidirectional relationship between traditional assets and the crypto index. The robustness of the causality relations is checked using the Johansen Cointegration test. All the assets taken under study, country-wise, are cointegrated with one another. Hence, when building a multi-asset portfolio covering these five emerging nations, cryptocurrencies do not offer investors diversification, hedging, or haven benefits.