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Saudi Journal of Economics and Finance (SJEF)
Volume-5 | Issue-09 | 397-410
Original Research Article
Benford's Law Analysis to Determine Audit Priorities (Case Study on the 2020 Central Government Financial Statement Audit)
Yudhistira, Nengzih Nengzih
Published : Sept. 27, 2021
DOI : 10.36348/sjef.2021.v05i09.006
Abstract
One of the key determinants of government size is the quantity of expenditure the government does out of the funds it gets from revenues and borrowings. Therefore, effective mobilization of public-sector funds requires exploring how the revenues and borrowings impact on the future values of government expenditure. In this line, using government expenditure as the proxy for government size and Nigeria as a case study, this paper examines the future course of government size in Africa’s oil-producing countries through an ex post forecasting analysis which involves forecasting Nigeria’s government expenditure in an autoregressive distributed lag (ARDL) model. The analysis is based on time series data spanning 1981 to 2017, out of which the ARDL model is estimated for the 1981-2014 period, before ex post forecasting is done for the remaining 2015-2017 period. The results show that oil revenue, external debt, and the past level of government expenditure will have positive correlations with the future levels of government size, while non-oil revenue and domestic debt will have negative correlations. However, current oil revenue will play a unique role in the future path of government size, in that oil revenue is the only exogenous variable without any lagged term selected with its current term by the information criterion (Akaike Information Criterion) used for selecting the optimal ARDL model, which is selected among 2,500 competing models. A key policy implication of these findings is that optimum mobilization of public funds in the concerned countries requires paying special attention to current oil revenue.
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