Does Business Cycle Affect Health Expenditure? Evidence from Nigeria

The autoregressive distributed lag estimation method is used in this study to investigate the impact of the business cycle on health expenditure in Nigeria between 1980 and 2020. In particular, the real Gross Domestic Product (GDP) growth rate, the unemployment rate, and the output gap are employed as proxies for the business cycle, while domestic general health expenditure expressed as a percentage of GDP serves as a proxy for health expenditure. We also account for other variables, which include population growth, infant mortality rate, CO2 per capita, and urbanisation. Our findings show that all the measures of the business cycle have a negative impact on health expenditure in the short run (countercyclical). However, in the long run, the business cycle captured by real GDP growth rate and output gap has a positive effect (favourable procyclical) on health expenditure. Given our findings, we suggest that in order to guard against the short-term economic swings that frequently affect government expenditure, including health expenditure, there is need to ensure revenue diversification