Abstract
This study examines the impact of fiscal, monetary and trade policies on Nigerian economic growth from 1985 to 2020. This study adopts endogenous growth model (AK model) as its theoretical framework. The unit root test results reveal that there is mixed level of stationarity in the variables. The bound test result shows that the variables cointegrate. The ARDL long-run result shows that fiscal policies stimulate economic growth, while on the contrary, trade policies deter Nigerian economic growth. The short-run result shows that the fiscal policies has an inconsistent impact on Nigerian economic growth and thus differs from the long-run result; while government spending continues to drive economic growth in Nigeria, government revenues have no effect on the growth of the economy. The result of the impact of monetary policies shows that interest rate impels growth of the economy while money supply deters growth of Nigeria’s economy; lastly, the trade policies maintain her negative influence on the economy in both the long run and short run. Sequel to the findings, the study recommends the following: Policymakers should place more emphasis on using fiscal policy which was found to be stimulating the country's growth rate. Whenever it is expedient to use monetary policy to stimulate economic growth, policy makers should make use of interest rates as it stimulates the growth of the economy in the short run. The government should review her trade policies to reduce import by encouraging consumption of local products and motivate exporters of goods (raw material) to refine the products before exporting such.
Highlights
The fundamental roles of fiscal policy, monetary policy and trade policy cannot be over-emphasized in any open economy, especially in terms of economic management
The table shows that the mean value of Gross domestic product per capital (GDPPC) and IINTR were greater than their median values which implies that the distribution of GGDPPC and Interest rate (INTR) are skewed to the right, suggesting that Nigeria has GDPPC and INTR that are lower than their average value
The mean value of gross capital formation, government expenditure, government revenue, money supply and trade openness were smaller than their median values suggesting that Nigeria has gross capital formation, government expenditure, government revenue, money supply and trade openness that are higher than their average values
Summary
The fundamental roles of fiscal policy, monetary policy and trade policy cannot be over-emphasized in any open economy, especially in terms of economic management. The quests to achieve and sustain macroeconomic objectives explain the vital roles played by fiscal, monetary and trade policies in both developed and developing economies, which Nigeria is inclusive. Babar [1] noted that it is the goal of any rational government to improve the living conditions of her populace through major economic policy either through fiscal, monetary. In the time of economic crisis, government combines both fiscal and monetary policies to curb fluctuations of business cycle. Government put in place trade policy with the aim of improving trade relation and builds the necessary safety net against external shocks through stabilized exchange rate
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