Abstract
This study broadly examined the effect of fiscal policy on sectoral output growth in Nigeria for the period of 1970-2013. The study employed an Autoregressive Distributed lag (ARDL) and Error Correction Model (ECM). The results showed that total fiscal expenditure (TEXP) have positively contributed to all the sectors output with an exception of agriculture sector. The findings established that manufacturing sector has a positive relationship with all the determinant variables, while inflation rate has negatively impacted output growth of the various sectors with an exception of manufacturing sector. The study concluded that the existence of disparity in the sectoral response to fiscal policy variables underscored the difficulty of conducting uniform and economic wide fiscal policy in Nigeria. Therefore, the best policy approach is to adopt sector specific policy based on their relative strength and significance in each sector of the economy within the overall fiscal policy mechanism framework.
Highlights
The achievement of macroeconomic goals namely; full employment, stability of price level, high and sustainable economic growth, and external balance, from time immemorial, has been a policy priority of every economy whether developed or developing economies (Akanni and Osinowo, 2013)
Fiscal and monetary policy instruments are the main instruments of achieving the macroeconomic targets
All the variables in the model are subjected to stationary test using Augmented Dickey Fuller (ADF) Unit Root Tests
Summary
The achievement of macroeconomic goals namely; full employment, stability of price level, high and sustainable economic growth, and external balance, from time immemorial, has been a policy priority of every economy whether developed or developing economies (Akanni and Osinowo, 2013). The realization of these goals undoubtedly is not automatic but requires policy guidance. This policy guidance represents the objective of economic policy. The basic fiscal policy instruments are public expenditure and tax while the monetary policy instruments include the devices of reserve requirements, discount rates and open market policy. Given the fact that fiscal policies impact on economic growth and development, it is not surprising that they are interrelated (Akanni and Osinowo, 2013)
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