ESTIMATING THE IMPACT OF PUBLIC HEALTH EXPENDITURE AND EXCHANGE RATE ON AGGREGATE OUTPUT IN NIGERIA
Aliyu A. Yusuf, PhD.
Volume 2 Issue 2
Abstract
It is imperative that allocation to health sector in developing economies required to be improved with regards to the level of growth in the economy. Considering the dwindling in exchange rate, the purchasing power drop significantly affecting various services. This article aimed at estimating the dynamic impact of public health expenditure, exchange rate fluctuations and aggregate output as a proxy for economic growth using vector autoregressive model and time series data spanning from 1981 to 2021. Besides gross domestic product (GDP), public health expenditure (PHEX) and exchange rate (EXCHR), the balance of payment (BOP) and oil revenue (OILRV) were introduced in the model as part of the explanatory variables. The study adopts Phillips- Perron criterion to test for stationarity in unit root and the results indicated that all the variables are stationary in I(1) order at first difference. The findings of block exogeneity/Granger causality test indicate that real gross domestic product (GDP) and oil revenue granger cause exchange rate at the 5% significance level with public health expenditure and balance of payment do not granger cause exchange rate. The results of impulse response revealed that public health expenditure rise from negative to positive, exchange rate and balance of payment responded considerably through negative boundary without crossing to the positive lines with the oil revenue moving towards one point to another and remained through in the positive boundary in responding to a one standard deviation shock to the real GDP in the economy. The study recommends a sustainable increase in allocation to the health sector, improved exchange rate management policy for increasing purchasing power of Naira and diversification to curtail over dependency on oil in Nigeria. Keywords: Public Health expenditure, Exchange rate, GDP, VAR Model, Impulse Response Function, Nigeria
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