A study on the effect of the growth rate of gross domestic product on some macroeconomic variables

Abstract

This study examined the effect of the growth rate of Gross Domestic Product (GDP) on inflation, money supply, and crude oil price using Autoregressive Distributed Lag (ARDL) model. Tests of stationarity and cointegration were carried out, also ARDL and Error Correction models were used to model the relationship among the variables. Quarterly data was extracted from the Central Bank of Nigeria website from 2010 to 2023. The stationarity test indicated no unit root, while the cointegration test indicated the presence of a long-run relationship among the variables. Inflation and crude oil prices have a significant impact on the growth rate of GDP in the long run, while in the short run, the crude oil price has a significant impact on the growth rate of GDP. The Error Correction model indicated a significant relationship between the growth rate of GDP and money supply. The adjustment term was -2.96, which inferred that the model was explosive, and a stabilizing error correction term was used to adjust for the explosiveness. The stabilizing error correction model indicated a significant relationship between the growth rate of GDP, crude oil prices and inflation. The stabilizing error correction model was observed to perform better than the error correction model.