The Impact of Transfer Pricing on Economic Growth in Nigeria

Abstract

This research uses a co-integration with vector error correction and Granger causality techniques to investigate the impact of transfer pricing on economic growth in Nigeria. Variance decomposition and impulse response function are adopted to add rigour. Correlation matrix and diagnostic tests are conducted to ascertain whether the results are biased. The empirical evidence reveals that the normalised long run equilibrium indicates that transfer pricing with unemployment variable negatively related to economic growth. The short run dynamics support the co-integration results by being appropriately signed and statistically significant. The Granger causality result indicates that transfer pricing does not Granger cause economic growth in Nigeria. Result on variance decomposition show that the predominant source of variation in output growth is economic growth. On impulse response function, result indicates that to a large extent the response of economic growth to transfer pricing is negative. Results from the diagnostic tests suggest that the long run, Granger causality, variance decomposition and impulse response results are not spurious.