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The Economics and Finance Letters

March 2019, Volume 6, 1, pp 57-66

Impact of Asymmetric Government Spending on Real Balances Demand

Tersoo Shimonkabir SHITILE



Tersoo Shimonkabir SHITILE 1

Gylych JELILOV 2

  1. Economics Department, Nile University of Nigeria and Central Bank of Nigeria. 1

  2. Economics Department, Nile University of Nigeria. 2

Pages: 57-66

DOI: 10.18488/journal.29.2019.61.57.66

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Article History:

Received: 15 January, 2019
Revised: 25 February, 2019
Accepted: 05 March, 2019
Published: 08 May, 2019


This paper uses time series technique on Nigeria’s data spanning over 20 years, 1995Q1 to 2018Q1 in order to examine the impact of asymmetric government spending on money demand. Taking into account the recent empirics and methodological approach in money demand function such as income decomposition in public and private sectors, an augmented empirical model of real balances demand was applied which underscores the positive and negative changes in government. The empirical results show a positive value of real government spending accounting for 30 per cent changes in long-term demand for real balances. However, the negative value of real government spending influence accounts for 20 per cent real balances demand in the long-term. This inquiry, thus contributes to the literature on the demand for real balances by focusing on the cyclical behavior of fiscal policy in Nigeria that has not so far been systematically tested. The findings on real government spending effect also suggest that bureau de change exchange rate and financial innovation have a negative and significant impact on money demand, which is consistent with findings of existing literature. The degree and direction of asymmetry provide a novel dimension to fiscal policy shock toward improving the outcome of stabilization policies.
Contribution/ Originality
This study is one of very few investigations to consider the influence of the cyclical behaviour of government expenditure on demand for real balances using the ARDL model in Nigeria from 1995 to 2018.


Government spending, Monetary policy, Money demand, Real balances demand, Stability, ARDL cointegration approach.




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This study received no specific financial support.

Competing Interests:

The authors declare that they have no competing interests.


Both authors contributed equally to the conception and design of the study.

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