Causality Ordinary

This study investigates the relationships between economic growth, government expenditure, and interest rates in Nigeria, employing various statistical methods. The research aims to provide actionable insights into the interactions between these crucial macroeconomic variables and their implications for policymaking. The theoretical foundation draws from Wagner's Law and the Keynesian Framework, which offer contrasting perspectives on whether government expenditure is a cause or effect of economic growth. Using data from the Central Bank of Nigeria and the World Bank, the study employs the Augmented Dickey- Fuller (ADF) unit root test to assess stationarity, the Granger causality test to examine causal relationships, and Ordinary Least Squares (OLS) regression to analyze the effects of interest rates and government expenditure on Gross Domestic Product (GDP). The findings confirm the applicability of Wagner's Law in the Nigerian context, 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 statistically significant. The study highlights the importance of interest rates as a policy instrument for influencing economic performance and attracting foreign investment. To enhance the statistical robustness of the analysis, the study incorporates the Analysis of Variance (ANOVA) table, demonstrating its effectiveness in x evaluating and improving the performance of regression models. The research culminates in actionable recommendations for policymakers, emphasizing the need for strategic fiscal policies, careful interest rate management, and targeted investments in sectors that foster economic growth. Overall, this study contributes to the understanding of the intricate dynamics between economic growth, government expenditure, and interest rates in Nigeria, providing valuable insights for policymakers and researchers alike.