Government capital spending lowers inflation, while recurrent spending drives it up!
The study looked at how government spending affects inflation in Nigeria, focusing on capital and recurrent expenses. Data from 1981 to 2019 was analyzed using a specific statistical technique. Results showed that when the government spends more on capital projects, inflation tends to decrease in the short term. On the other hand, higher recurrent spending leads to an increase in inflation. Changes in government spending have a temporary impact on inflation, eventually returning to normal levels. To keep the economy balanced, it is recommended that the government carefully manages both types of spending.