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Abstract
This study investigates the relationships between economic growth, governmentexpenditure, and interest rates in Nigeria, employing various statistical methods. The research aims to provide actionable insights into the interactions betweenthesecrucial macroeconomic variables and their implications for policymaking. The theoretical foundation draws from Wagner's Law and the KeynesianFramework, which offer contrasting perspectives on whether governmentexpenditure is a cause or effect of economic growth. Using data fromtheCentralBank of Nigeria and the World Bank, the study employs the AugmentedDickey-Fuller (ADF) unit root test to assess stationarity, the Granger causalitytest toexamine causal relationships, and Ordinary Least Squares (OLS) regressiontoanalyze the effects of interest rates and government expenditure onGrossDomestic Product (GDP). The findings confirm the applicability of Wagner's Law in the Nigeriancontext, indicating that economic growth granger-causes government spending. Furthermore, the analysis reveals a positive relationship between interest rates, government expenditure, and GDP, although the results are not statisticallysignificant. The study highlights the importance of interest rates as apolicyinstrument for influencing economic performance and attractingforeigninvestment. To enhance the statistical robustness of the analysis, the study incorporatestheAnalysis of Variance (ANOVA) table, demonstrating its effectivenessin xi evaluating and improving the performance of regression models. The researchculminates in actionable recommendations for policymakers, emphasizingtheneedfor strategic fiscal policies, careful interest rate management, andtargetedinvestments in sectors that foster economic growth. Overall, this study contributes to the understanding of the intricate dynamicsbetween economic growth, government expenditure, and interest rates inNigeria, providing valuable insights for policymakers and researchers alike.
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