The effects of fiscal operations on economic growth and stability in Nigeria: empirical evidence based on time series data

Abstract

This study examines the effects of fiscal operations on the economic growth and stability with the view to identifying its significance on real output growth and sustainable development. The study utilises an annual time series data covering the period of 1980 to 2015 and further adopts an ARDL model for estimation. The estimated model is sub-divided into two: the Baseline model and the Alternative model. While the former measures the effects of economic growth, the latter accounts for the effects of economic stability. The ARDL Bound testing show the existence of long-run relationship among the examined variables in both the two models, with corresponding F-statistic values of 7.62 and 6.67, respectively. The overall results indicate that fiscal operations lead to economic growth as shown by the Baseline model; and it also leads to economic stability as revealed by the Alternative model. It can therefore be concluded that any meaningful spending with corresponding taxation will improve the public sector performance and produce a desirable outcome on output growth and strengthen the capability of fiscal operations in terms of economic management. There is an urgent need to ensure that appropriate fiscal operations are conducted and do not result in excess liquidity beyond the absorptive capacity of the economy.