Fiscal and macroeconomic policies dynamics in Nigeria

A Ogar,L.G Suleiman,O.F Arikpo

doi:10.4314/gjss.v18i1.4

Abstract

This study examined fiscal policy and macroeconomic policy dynamics in Nigeria. The study specifically assessed whether there is a long run and short run causal relationship running from fiscal policy instruments such as government revenue, government expenditure and debt to macroeconomic variables such as interest rate and GDP in Nigeria. The data for the study were source from the CBN statistical bulletin for the period 1980 to 2016. The exploratory design was combined with the ex-post facto research design; the data collection method was desk survey. The study used the Vector Error Correction Mechanism (VECM) for data analysis. Findings from the analyses showed that there is no long run and short run causality running from fiscal policy instruments such as government revenue, government expenditure and debt to interest rate in Nigeria. The study also showed that there is no long run and short run causality running from fiscal policy instruments such as government revenue, government expenditure and debt to GDP in Nigeria. The study on the basis of these findings recommends that Fiscal policy should be tailored towards sustaining economic growth and development; in view of this government avoid further borrowings as this may increase the debt servicing burden and result in a negativity effect on growth in the long run and lastly that fiscal policy should be used to complement monetary policy effects as if used alone may not achieve the desired target for interest rate in Nigeria. Keywords: Government Expenditure, Government Revenue, Government Debt, Fiscal Policy, Interest rate, Inflation rate, Economic growth

Highlights

The need to achieve improved balance of payments position, balance industrial development, high employment level, increased productivity, equitable income distribution, high revenue sources, price stability and economic growth has necessitated the development of various macroeconomic policies
To assess the impact of fiscal policy tools on the interest rate in Nigeria; (ii) To examine the extent to which fiscal policy tools affects the economic growth in Nigeria; RESEARCH HYPOTHESES The following null hypothesis will be formulated for this study H01: Fiscal policy tools do not have any significant effect on interest rate in Nigeria; H02: Fiscal policy tools do not have any significant effect on economic growth in Nigeria; LITERATURE REVIEW AND THEORETICAL FRAMEWORK Theoretical framework Many theories of fiscal policy and macroeconomic variables exist but this study will only review Wagner’s law of increasing scale of public expenditure, Keynesian fiscal theory of output and income, savers spender’s theory and the classical theory
This finding agrees with Vincent, Loraver and Wilson(2012) who studied the relationship between fiscal policy and macroeconomic variables and found that interest rate and fiscal policy had no relationship in the long run

Summary

Introduction

The need to achieve improved balance of payments position, balance industrial development, high employment level, increased productivity, equitable income distribution, high revenue sources, price stability and economic growth has necessitated the development of various macroeconomic policies. Macroeconomic policies suggest the combination of government fiscal and monetary policies. Fiscal policy as a tool for macroeconomic management has been defined as a purposeful use of government revenue (majorly from taxes) and expenditure to manipulate the level of economic activities in a country (Akpapan, 1994). It can be conceived as part of government policy relating to the raising of revenue through taxation and other means and choosing on the level and pattern of expenditure for the purpose of manipulating economic activities or achieving some needed macroeconomic goals (Anyanwu and Ohahenam, 1995).

Objectives

Methods

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Discussion

Conclusion