DOES GOVERNMENT FISCAL EXPENSE AFFECT INFLATION AND CROWDS OUT INVESTMENT IN THE ECOWAS REGION?

Ebenezer A OLUBIYI, Felix OLAIFA, Glory Funmilayo AKINNOLA

Abstract

The study investigates the effect of fiscal spending on inflation and investment in the ECOWAS regional bloc.  The fiscal spending considered are the general government final consumption expenditure, military expense and external debt.  The ECWOAS countries are categorized according to their colonial origin, that is, Anglophone and Francophone.  Data were obtained from Word Development Indicators for all these variables alongside real effective exchange rate between 2001 and 2017.   The panel fixed effect shows that fiscal spending significantly affects private investment.  Specifically, Crowding out effect exists in ECOWAS as a whole. Also, general government final consumption and external debt have positive and significant effect on inflation rate in ECOWAS as a whole, Anglophone and Francophone countries. However, a crowding in effect subsists in the Anglophone countries while crowding out effect was observed in the Francophone countries.

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