Effects Of Macroeconomic Policies Research Articles

China’s GDP-at-Risk: Real-Time Monitoring, Risk Tracing, and Macroeconomic Policy Effects

Timely monitoring GDP-at-risk and tracing economic downside risk sources can help establish effective risk warning and prevention systems. This study constructs a probability distribution for China’s economic growth with skewness determined by a multidimensional predictor information set of macro fundamentals. Such a treatment allows us to identify changing drivers of economic downside risks during monitoring GDP-at-risk’s dynamic evolutionary path. We also employ a time-varying parameter vector autoregression model with random volatility to explore the heterogeneous impacts of different macroeconomic policy instruments on economic slowdowns. Our results provide empirical support for macroeconomic management and policy formulation in emerging markets. We reach three conclusions. First, the dynamics of GDP-at-risk exhibit significant event-driven characteristics, and economic downside risk increases significantly under the influence of extreme events. Moreover, the probability distribution of economic growth is asymmetric--as the downside risk of the economy increases, its upside potential increases disproportionately. Second, the time-varying risk trace of GDP-at-risk shows that the contribution of financial conditions and local government debt to economic downside risk declines. The importance of the risk-driving role of housing price growth gradually increases, suggesting that China’s property prices can provide more valuable early warning information about future growth risk, allowing time for precise preventive measures. Nevertheless, interest rates and inflation as risk divers have consistently minimal impacts. Third, the heterogeneity impulse response function of GDP-at-risk suggests that quantity-based monetary policy and fiscal policy can manage economic downside risks in the short run. In contrast, price-based monetary policy can curb economic overheating and reduce downside risks in the medium to long term. Therefore, the effect of price-based monetary policy is more sustainable in China.

Kenya’s macroeconomic policies and trade efficiency within the East African Community: A stochastic frontier analysis

Despite Kenya dominating trade volumes in the East African Community (EAC), it has been trading below its potential within the region. This is also in spite of the increased scope of the country’s trade opportunities resulting from the region’s increased market integration. Empirical evidence has shown that macroeconomic policies influence international trade flows. However, there is limited empirical evidence on the effect of macroeconomic policies on trade efficiency. The few existing studies on this topic have also used estimation techniques that depict efficiency as being drawn from an average level of trade and not the optimal level of trade, as well as also not separating the effects of inefficiencies from the statistical noises. This, therefore, creates a knowledge gap that this study aims at investigating by using the stochastic frontier gravity model (SFGM), to determine the effect of Kenya’s macroeconomic policies on its trade efficiency within the EAC. The study used annual panel secondary data for the period 2000 to 2021. This study finds that the GDP of Kenya and that of its EAC trading partners, the geographical distance and border significantly affects trade volume. It also finds that globalization plays a significant role in influencing Kenya’s trade. For the inefficiency model variables, exchange rate depreciation was found to significantly increase trade efficiency, while increase in tariff rate had an adverse and significant effect. Further, the study included corruption as a control variable and found that it significantly increases trade inefficiency. Kenya, though trading at an average efficiency level of 86.91 percent, was found to have high unexploited trade potentials within the region especially with Tanzania and Uganda. The study recommends that Kenya’s policymakers deliberately advance the macroeconomic policies that promote trade efficiency while at the same time closely monitor the ones that hinder efficiency.

Synthesization of macroeconomic policies and stock return synchronicity: Evidence from countries along the Belt and Road Initiative

This study investigated the impact of macroeconomic policy changes in China on the stock markets of its Belt and Road Initiative (BRI) partners, whose economies have significant spillover effects. This topic is critical, because the BRI is a pivotal regional cooperation framework, which substantially influences economic dynamics and trade expansion across participating countries. We studied 47 countries from 2006 to 2021, and found a positive relationship between the effectiveness of macroeconomic policies and stock return synchronicity in BRI countries. We also explored monetary and fiscal policies and discovered that increased policy intensities correlate with higher synchronicity in BRI stock markets. Additionally, the benefit of macroeconomic policies was more pronounced in countries with closer trade ties and greater policy coordination with China. Further investigation showed that during periods of increased economic policy uncertainties within China and globally, the increase of stock return synchronicity is more pronounced.

The impact of the tail risk of demand on corporate investment: Evidence from Chinese manufacturing firms

The tail risk of demand over the past certain periods not only affect entrepreneurs' expectations on future demand uncertainty, increase the option value of “waiting an see” for delay investment, but also affect entrepreneurs' confidence and risk appetite by adjusting the worst-case scenario in the “demand belief set”, thereby further inhibiting investment. Utilizing the year-on-year sales growth data of various manufacturing industries in China, and the General Pareto Distribution method of Extreme Value Theory to estimate tail-index parameter and tail threshold as proxies for the tail risk of industry-level demand. Combined with the firm level data, our empirical results show that the tail risk indeed affect firm investment negatively, especially after the outbreak of global financial crisis, but such focal effect is stronger for firms with non-state ownership, small size, lower productivity and stricter financing constraints. Expansionary macroeconomic policies such as monetary and fiscal policy in periods of high tail risk have a higher incentive effect on firm investment, which provides more evidence for the effectiveness of macroeconomic policies during the economic recessions.

ASSESSMENT OF THE CONNECTION BETWEEN THE BANK'S CAPITALIZATION LEVEL AND THE COUNTRY'S MACROECONOMIC STABILITY

A well-capitalized banking system is crucial for maintaining macroeconomic stability, preventing financial crises, and bolstering the economy's resilience to shocks. Governments often strive to ensure adequate bank capitalization to foster stable economic growth. This article aims to assess the relationship between bank capitalization and macroeconomic stability in 34 European countries from 2010 to 2021, based on World Bank statistics.The study utilizes the principal components method to identify relevant indicators of bank capitalization and macroeconomic stability, canonical analysis and regression analyses to detail the interconnections between these blocks. The canonical analysis confirms a link between bank capitalization and macroeconomic stability indicators with a coefficient of determination of 0.617 signifying that 61.8% of the variance in macroeconomic stability is explained by fluctuations in bank capitalization.The article presents one fixed-effect and two random-effect regression models detailing the directions and strength of influence of independent variables (NPL, ROA, ROE - indicators of the bank capitalization level) on dependent variables (INFLATION, UNEMPL, GINI - indicators of macroeconomic stability). The Wald criteria and a p-value less than 0.05 indicated that the models with random effects (UNEMPL, GINI) were statistically significant.The results reveal that a 1% increase in non-performing loans correlates with a 0.25% rise in the unemployment rate, and a 1% increase in return on assets leads to a 0.08% increase in the unemployment rate. Additionally, a 1% increase in non-performing loans raises the Gini index by 0.05%, while a 1% increase in return on equity decreases the Gini index by 0.03%. Notably, the impact of return on assets on the unemployment rate and the Gini coefficient is not statistically significant (p-value greater than 0.05).These results can inform the forecasting of national indicators, the development of tools to ensure sufficient bank capitalization, and the formulation of effective macroeconomic policies, taking into account fluctuations in banks' capitalization levels as key financial intermediaries.

Estimating the effect of exchange rate fluctuations on general index of stock prices in Khartoum stock exchange using GARCH model (2004-2019)

The study aimed to estimate the effect of exchange rate fluctuations on the general index of stock prices in the Khartoum Stock Exchange using the general conditional variance models. The study problem was formulated in the following main question: What is the effect of exchange rate fluctuations on the general index of stock prices in the Khartoum Stock Exchange? The study was built on the following main hypothesis: There is a statistically significant relationship between exchange rate fluctuations and the general index of stock prices in the Khartoum Stock Exchange. The study followed the quantitative standard approach using the general conditional variance models and the ordinary least squares. The study found a direct relationship between exchange rate fluctuations and the general index of stock prices in the Khartoum Stock Exchange. The study recommended the adoption of effective macroeconomic policies to reduce the exchange rate and support it with production to reflect positively on the general performance of the Khartoum Stock Exchange Index, which increases opportunities and potentials for local and foreign investment.

ASSESSMENT OF STATE SUPPORT OF THE ECONOMY IN A CRISIS

In conditions of economic crisis, government agencies often adopt a number of programs in order to stabilize the economic situation in the country. Such measures may include increased government spending, lower tax rates, or financial assistance to certain sectors of the economy. However, in the process of implementing such measures, the state should monitor the effective use of public resources. Therefore, the state audit is necessary to ensure transparency and efficiency of the work of state bodies, as well as to improve the financial results of the state as a whole. In the context of the economic crisis associatedwith the post-pandemic period, geopolitical and geo-economic instability, the role of the state audit in theimplementation of anti-crisis measures becomes even more important.An important aspect of this work is the identification of problems related to the evaluation of the effectiveness of the state audit and the limitations faced by auditors when conducting a state audit.The purpose of this study is to study the role of the state audit in improving the efficiency of the use of funds in the framework of measures to overcome crisis phenomena on the basis of an improved methodology for evaluating effectiveness.The methods of assessing the effectiveness of macroeconomic policy based on the experience of thegovernments of the G7 countries have been studied. The methodology of the process of studying the components of the crisis impact of this policy, including the definition of success criteria, has been developed.Recommendations for improving the anti-crisis strategy in the context of global disasters are proposed. The results of this study remain relevant in the context of the current economic crisis caused by geopolitical tensions.

The prediction of Chongqing's GDP based on the LASSO method and chaotic whale group algorithm–back propagation neural network–ARIMA model

Accurate GDP forecasts are vital for strategic decision-making and effective macroeconomic policies. In this study, we propose an innovative approach for Chongqing's GDP prediction, combining the LASSO method with the CWOA—BP–ARIMA model. Through meticulous feature selection based on Pearson correlation and Lasso regression, we identify key economic indicators linked to Chongqing's GDP. These indicators serve as inputs for the optimized CWOA–BP–ARIMA model, demonstrating its superiority over Random Forest, MLP, GA–BP, and CWOA–BP models. The CWOA–BP–ARIMA model achieves a remarkable 95% reduction in MAE and a significant 94.2% reduction in RMSE compared to Random Forest. Furthermore, it shows substantial reductions of 80.6% in MAE and 77.8% in RMSE compared to MLP, along with considerable reductions of 77.3% in MAE and 75% in RMSE compared to GA–BP. Moreover, compared to its own CWOA–BP counterpart, the model attains an impressive 30.7% reduction in MAE and a 20.46% reduction in RMSE. These results underscore the model's predictive accuracy and robustness, establishing it as a reliable tool for economic planning and decision-making. Additionally, our study calculates GDP prediction intervals at different confidence levels, further enhancing forecasting accuracy. The research uncovers a close relationship between GDP and key indicators, providing valuable insights for policy formulation. Based on the predictions, Chongqing's GDP is projected to experience positive growth, reaching 298,880 thousand yuan in 2022, 322,990 thousand yuan in 2023, and 342,730 thousand yuan in 2024. These projections equip decision-makers with essential information to formulate effective policies aligned with economic trends. Overall, our study provides valuable knowledge and tools for strategic decision-making and macroeconomic policy formulation, showcasing the exceptional performance of the CWOA–BP–ARIMA model in GDP prediction.

Анализ зарубежного опыта развития инновационных систем

The article focuses on the experience of developing the innovation system of Singapore with an emphasis on the main elements, success factors and decisions taken by the government of the country in different periods in order to intensify the exchange of knowledge, develop innovation and strengthen the competitive position on the world market. There have been analyzed the main stages of the evolution of the innovation system of Singapore: the industrial take-off (from the early 1960s to the mid-1970s), local technological deepening (from the mid-1970s to the end of the 1980s), applied expansion of research and development (R&D) (from the mid-1980s to the end of the 1990s), high-tech entrepreneurship and development in the field of R&D (from the mid-1990s to the present). The identification and analysis of the main stages, as well as documents (the National Plan for Science and Technology, the Science and Technology Plan, the Plan for Research, Innovation and Entrepreneurship) made it possible to establish the most significant features of the Singapore innovation system including a targeted policy in the field of foreign direct investment, leading to increased R&D activity in enterprises; effective macroeconomic policy, including in the field of social issues, combined with innovation policy; step-by-step creation of conditions for the development of innovations within multinational corporations, local manufacturing enterprises, state research institutes and centers and university R&D, local high-tech start-ups. The analyzed experience can be useful in improving the existing (or searching for a new model) innovation system in Russia in modern economic, political and technological conditions.

Stability and performance of monetary and fiscal policies in the euro area

This research article examines the sustainability of fiscal policy and the impact of monetary policy on public debt management in the euro area from 1980 to 2014. This study applies the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests to verify the existence of stationarity and indicates that the relevant variables are integrated. The analysis is based on error correction models and cointegrated VAR-models. The empirical findings indicate that there is no evidence to support the existence of strong political coordination in the euro area. Additionally, the study supports the idea that monetary policy has a more stabilizing influence on economic activity than budget policy. An important policy implication resulting from this study is that the fiscal rule generates a divergent dynamic of the public debt. The results suggest the Keynesian effects of macroeconomic policies in the eurozone and conclude that there is a sort of complementarity between monetary and fiscal policies in some euro area countries. This means that a restrictive monetary policy (higher interest rates, interest) is always accompanied by a restrictive fiscal policy (higher taxes or lower public spending) and vice versa. Concerning the Vector Error Correction Model (VECM) techniques, the findings demonstrate that the debt has a positive effect on the budget deficit, which ultimately results in behavior that affects the debt's stability.

‘Independence’ of Central Banks and the Political Economy of Monetary Policy

ABSTRACT The notion of an ‘independent’ central bank has dominated monetary policy debates for the past three decades. The arguments for the political independence of central banks are closely related to the adoption of ‘inflation targeting’. The arguments for an independent central bank are based on the ‘credibility’ of the ‘conservative’ central bank in comparison to government decision making. The independence of a central bank has been a matter of independence from government but not independence from the grip of the ‘new consensus in macroeconomics’ nor from the interests of the banking and financial sector. That independence has also supported a lack of co-ordination between monetary and fiscal policies, diminishing the effectiveness of macroeconomic policies. In addition, there remain doubts about the effectiveness of ‘inflation targeting’ on the achievement of low inflation. The policy mandates of central banks have begun to shift towards financial stability and paying attention to issues of inequality and the climate emergency.

Measurement of China's Human Development Index and Analysis of Its Influencing Factors from the Perspective of New Development Concept.

This paper redefines the connotation of China's human development in the context of the new development concept and high-quality development, and constructs the China Human Development Index (CHDI) indicator system accordingly. Then, based on the inequality adjustment model and DFA model, the human development level of each region in China from 1990 to 2018 is measured, and the spatial and temporal evolution characteristics of China's CHDI and the current situation of regional imbalance are analyzed accordingly. Finally, LMDI decomposition technique and spatial econometric model were used to study the influencing factors of China's human development index. The results show that: (1) The weights of the CHDI sub-index estimated by the DFA model have good stability, and it is a relatively good objective weighting method. (2) Compared with the HDI, the CHDI in this paper can better reflect the level of human development in China. (3) China's human development has made great achievements and has basically achieved the leap from the low human development level group to the high human development level group. However, there are still significant gaps between regions. (4) From the results of LMDI decomposition, the livelihood index is the most important driving index of CHDI growth in each region. From the results of spatial econometric regressions, there is a strong spatial autocorrelation of China's CHDI among the 31 provinces. GDP per capita, financial education expenditure per capita, urbanization rate, and financial health expenditure per capita are the main influencing factors of CHDI. Based on the above research findings, this paper proposes a scientific and effective macroeconomic policy with important reference value for promoting the high-quality development of China's economy and society.

Unemployment and Economic Growth: Testing the Validity of Okun’s Law in Nigeria

This study explores the dynamic relationship between unemployment and Gross Domestic Product (GDP) growth in the context of the Nigerian economy from 1991 to 2021. Guided by Okun’s Law, which posits a negative correlation between these two variables, rigorous econometric analysis was employed to investigate their empirical validity in the Nigerian context. The results of the analysis demonstrate a statistically significant and negative relationship between the unemployment rate and GDP growth. Specifically, a one-percentage-point increase in the unemployment rate is associated with a substantial decrease in GDP growth of approximately 2.5 percentage points. These findings affirm the relevance of Okun’s Law in Nigeria, highlighting the significant effect of unemployment on economic performance. The study also provides valuable insights for policymakers, offering evidence-based recommendations to guide the formulation of effective macroeconomic policies, including targeted measures to reduce unemployment and enhance economic forecasting.

The monetary policy impact on agricultural growth and food prices

Agricultural growth is closely associated with sustainable economic development. This is especially true from the perspective of developing countries, such as Indonesia and Pakistan, where significant portions of the labour force are dependent on agriculture for their livelihood. This paper aims to examine the effects of macroeconomic policy (i.e. monetary policy) on employment, food inflation, and agricultural growth by analysing to what extent monetary policy is effective in controlling food price inflation, the effect of contractionary monetary policy on the agricultural sector’s employment and productivity, and the extent of monetary policy transmission to money market rates and 10-year interest rates. We employed a factor-augmented vector autoregressive model proposed by Bernanke et al. (2005) to agricultural data from 1995 and 1996 to 2016 for Indonesia and Pakistan, respectively. Main findings of the study demonstrate that tight monetary policy significantly reduced food inflation and agricultural production while increasing the rural unemployment rate. Short-term and 10-year interest rates increased owing to the contractionary monetary policies pursued by both countries. An inclusive monetary policy whereby policymakers work alongside governments to achieve price stabilisation and reasonable employment rates is recommended.

ECONOMIC GROWTH AND TOTAL FACTOR PRODUCTIVITY IN CENTRAL AND EASTERN EUROPEAN COUNTRIES BETWEEN TWO GLOBAL CRISES AND BEYOND

The aim of the article is to assess the factors of economic growth of the CEE countries over the 30-year history, the productivity of capital and human resources, the resilience of these countries to the negative impact of the global financial crisis. Methodology. The Solow growth model was used to estimate the growth rates of capital, labor and total factor productivity (TFP). The impact of macroeconomic indicators on GDP and TFP growth is assessed. The group of Central and Eastern European countries that joined the European Union was chosen for the analysis: Bulgaria, Romania, Poland, Hungary, Czech Republic, Slovakia, Slovenia, Estonia, Lithuania, Latvia, as well as post-Soviet European countries: Ukraine, Belarus, Russia and Moldova and Albania in the period from 1991 to 2019. Results. TFP makes a significant contribution to the economic growth of CEE countries. During the period of market reforms, TFP significantly decreased, and during the boom of 2000-2008 it fully ensured the growth of the CEE economies, after the crisis of 2008, the contribution of TFP decreased by 2 times. In the conditions of recovery, TFP growth is positively influenced by inflation, negative CA balance, and unemployment reduction. In the post-crisis period, a decrease in inflation, a positive CA balance, and an increase in unemployment had a positive impact on TFP growth. During a depression, the influence of capital becomes dominant. Restrictive monetary policy contributes to the efficiency of CEE economies. In the short run, unemployment increases, but in the long run it decreases significantly due to the growth of investment and exports. Practical implications. The analysis makes it possible to identify effective macroeconomic policies to stimulate the productivity of the economies of Central and Eastern Europe during the period of economic recovery and depression. Value/originality. A long-term study of the economic performance of CEE countries using the Solow methodology has revealed the behavior of total factor productivity in different periods of modern economic history and its contribution to economic growth.

ПОСЛЕДСТВИЯ ПАНДЕМИИ COVID 19: СЛУЧАЙ ЭКОНОМИКИ АРМЕНИИ

The COVID 19 pandemic has become a real test for humanity in general and the global economy in particular. The events of the last two years have forced the states of the world to actively pursue anti-crisis policies, including support for business and the pop- ulation. At the same time, taking into account the lockdown and many restrictions, eco- nomic activity in almost all countries has suffered greatly. Developing economies, due to the weakness of market institutions and the limited capacity of state budgets, have suffered losses significantly higher than can be observed in developed countries. The problem of macroeconomic regulation in the context of the pandemic crisis has be- come very relevant over the past two years, both in developed and developing countries. This article is devoted to the analysis and assessment of the consequences of the COVID19 pandemic crisis in Armenia, in terms of both social and economic effects. The methodological basis of the study was an overview of the key indicators of eco- nomic development in Armenia over the past two years. The result of the study was the conclusion that in the context of the COVID19 pandemic crisis, the main macroeco- nomic indicators indicate a reduction in economic activity and, as a consequence, a de- crease in the standard of living in Armenia. The conducted research made it possible to identify the key "sore spots" of the Armenian economy, both from the point of view of its economic development, and the consequences of the crisis, which are of a social na- ture. The research attempts to assess the effectiveness of macroeconomic policy in the context of the economic crisis of the COVID19 pandemic, as well as the possibilities of overcoming the consequences of the crisis of 2020-2021.

An empirical investigation of determinants & sustainability of public debt in Pakistan.

An assessment of debt dynamics and its sustainability is very important in formalizing prudent and effective macroeconomic policies especially for the economies with weak macroeconomic fundamentals and alarming debt levels. Keeping in view the recent debt escalation in Pakistan, this study aims to explore the important factors that influence the public debt dynamics in case of Pakistan and to evaluate its sustainability. This study applies the debt dynamic approach for empirical assessment of drivers of changing debt levels and analysis of public debt sustainability. Furthermore, ARDL approach is utilized to study the short- and long-run debt dynamics using historic data from 1975 to 2021. This study is distinct from already existing work on debt assessment in Pakistan as it examines both important dimensions of public debt (determinants & stability) by employing the novel dynamic debt modelling approach and using most recent data. The study finds a positive and significant impact of fiscal deficit, exchange rate depreciation and interest rate on public debt in Pakistan. The debt sustainability analysis also reveals the instability of public debt for the entire study period except for few years. The regression results corroborate with the findings from stability analysis, and the main driving forces for increasing the debt burden of the country are found to be the fiscal indiscipline along with the rising cost on account of ER depreciation and higher interest rates.

Growing with inequality: a DSGE model with heterogeneous human capital and endogenous economic growth

ABSTRACT We try to explain the simultaneous increases in economic growth and income inequality in China with a heterogeneous endogenous growth-based DSGE model. It is found that: First, our model can simulate the positive correlation between economic growth and income inequality in China. China’s economic development has created better conditions and incentives for the accumulation of human capital of workers with high initial human capital, thus stimulating them to contribute more to economic growth, but this widens the income inequality simultaneously. Second, the change in economic growth and the change in income inequality also exhibit a positive correlation under the influence of various policy shock. Any shock that raises economic growth, such as different types of technology shock and investment shock (after 8 quarters), will correspondingly widen income inequality. Conversely, any shock that reduces economic growth, such as fiscal spending shock, interest rate shock and investment shock (before 8 quarters) will correspondingly reduce income inequality. Third, the government’s preference for workers with high initial human capital in the implementation of macroeconomic policies determines the positive correlation between the change in economic growth and in income inequality. Workers with high initial human capital are central to the effectiveness of macroeconomic policies.

Habits, Rule-of-thumb Consumption and Useful Public Consumption in Sub-Sahara Africa: Theory and New Evidence

Abstract Aggregate consumption behaviour of private agents is central in the mediation and effectiveness of macroeconomic policies, and it is therefore of first-order importance. In this paper, I derive and estimate a structural consumption model for a panel of 34 sub-Sahara African (SSA) countries from 1960 to 2018 to provide new evidence on three important aggregate consumption behaviours—habit formation, rule-of-thumb consumption behaviour and the complementarity of government consumption in private utility. The following key findings emerge. (1) There is evidence of habit formation in aggregate consumption. (2) Approximately 38% of consumers follow the rule-of-thumb of consuming their current income suggesting a deviation from the permanent income hypothesis in SSA. However, this rule-of-thumb consumption behaviour in the data is driven by the period before the mobile banking/money era that emerged post-2000s. (3) Public consumption complements private consumption in an Edgeworth–Pareto sense. This suggests that expansionary fiscal policies involving increases in government consumption can be an effective vehicle in stimulating aggregate demand via a positive marginal utility channel. These findings are robust to demographic factors and stable under different model assumptions.

Foreign Aid, Domestic Savings and Investment: Implications for Nigeria

The study examined the implications of foreign aid on domestic savings and investments in Nigeria. The scope of the study covered a period from 1987 to 2019. The hypotheses were tested using the E-view statistical software adopting the Ordinary Least Square (OLS) method on the regression models adopted. The signs and significance of the regression coefficients and the probability were relied upon in explaining the nature and influence of the independent variable on the dependent variable as to determine both magnitude and direction of impact. In the analysis we relied on the following statistical tools; Correlation Coefficient (R), Coefficient of Determination (R2), probability and the student (t) test. The hypotheses were tested at 0.05 (5%) level of significance. Results of the findings revealed that: Foreign aid had positive and significant impact on Gross Domestic Product (GDP), Foreign aid had positive and significant impact on domestic savings and Foreign aid had positive and significant impact on domestic investment in Nigeria within the period under review. The study concluded that, the contribution of foreign aid to growth can be magnified if Nigeria focuses on implementing effective macroeconomic policies. It is therefore recommended that, policies that strengthen the state and its institutions such as institutional development, human capital development, investment targeting, diversification of the Nigerian economy, a stable and trust worthy political environment, monitoring and evaluation on the use of aid funds and other aid-friendly domestic policies should be promoted