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Over the years the federal government of Nigeria's budget has been in deficit and this has been receiving attention as regards its effect on the economy and other macroeconomic variables in Nigeria. The study, therefore, examines the impact of government budget deficits on macroeconomic variables (interest rate, exchange rate, inflation rate, money supply, and gross domestic product) in Nigeria. The study employed a time series data between 1981 and 2019 which was subjected to unit root test adopting Augmented Dickey-Fuller to test the stationary of the variable. The result revealed that the variables are stationary at level and 1st difference at intercept. VAR lag order selection criteria test was conducted and most of the criteria suggested lag 2 which was used for the analysis. ARDL bounds test affirmed the existence of a long-run relationship among the variables, hence subjected to ARDL cointegration and long-run form test. The interest rate model indicated a positive and significant relationship between government budget deficits and interest rate while the exchange rate model specified a negative but insignificant relationship between government budget deficits and exchange rate. The study, therefore, recommended that government should minimize budget deficits by minimizing its recurrent expenditure and ensure strict government expenditure control to avoid possible corruption. Government support for local production should be improved to encourage export and minimize importation which will thereby appreciate Naira, and government should ensure a way of improving revenue generation to minimize deficits through tax collection and other levies.

This study aims to analyze empirically the impact of natural disasters on budget deficits. The study on 34 OECD countries covers the period 2000-2018. The results of the study obtained by employing two-stage system GMM analysis reveal public debt, foreign trade, GDP growth, and total loss costs of natural disasters affect the budget deficits statistically significantly and positively, while population density negatively affects the population density; however, there is no statistically significant relationship between inflation and budget deficits. [ABSTRACT FROM AUTHOR]

We investigate the impact of federal government budget deficits and federal personal income tax rates on the ex post real interest rate yield on ten-year US Treasury notes. Using autoregressive two-stage least squares estimations for the post-Bretton Woods era, we find that the yield on these Treasury issues has been an increasing function of the federal budget deficit as a percent of GDP, both in the form of the total/unified deficit and the primary deficit, and also an increasing function of the average effective federal personal income tax rate. The estimation reveals that growth in the M2 money supply (relative to GDP) acts to reduce the real interest rate yield on ten-year Treasuries. Consequently, while a growing money supply can help to keep real interest rates on Treasury notes (and hence federal debt service costs) down, policymakers should be sensitive to the fact that both budget deficit increases and tax rate increases can elevate the real interest rate.

Previous papers investigating the structural determinants of budget deficits in panels of developing and/or developed countries either found that there exists a negative relation between financial development and fiscal balance or that the first is not a significant determinant of the later. This paper asks whether financial development is relevant to explain budget deficits within a country specific context. We use data from Cameroon between 1990 and 2021 and the ARDL bound cointegration technique. Our results show positive significant coefficients in the short-run, statistically not significant coefficients in the long-run and an ECT of - 1.48. In Cameroon, financial liberalization and financial development may lead to fiscal discipline so as to reduce budget deficits progressively. We then recommend enhancing financial development in order to improve the country's fiscal balance management. [ABSTRACT FROM AUTHOR]

We revisit the twin deficits hypothesis (budget and trade deficits) for the United States during 1791–2019, using the system-equation ADL test for threshold cointegration proposed by Li (2017). This model can demonstrate the existence of both asymmetric adjustment and asymmetric role in the relationship between trade and budget deficits. Our empirical evidence suggests a nonlinear long-run relationship between the two variables, thus finding the presence of the twin deficits hypothesis. Further, we find time–varying cointegration between the two, and an asymmetric adjustment process. Budget deficits play a vital adjustment role at low regimes (when error-correction terms are below the threshold of 1.11), and trade deficits play an important adjustment role at higher regimes (when error-correction terms are above the threshold of 1.11). [ABSTRACT FROM AUTHOR]