Fiscal and macroeconomic policies dynamics in Nigeria

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