The study examined the impact of government fiscal and monetary policies on economic growth within the period of 33 years (1981-2014). Time series data were derived from the Central Bank of Nigeria statistical bulletin, while the method of analysis was the Johansen Cointegration test, vector error correction method and the Wald test of coefficient. The result of the findings showed that there is a significant relationship between explanatory variables (government expenditure, interest rate and money supply) taken jointly and the dependent variable (real gross domestic product) in the long run. The coefficient of error correction term is -0.02 showing a 2% yearly adjustment towards the long run equilibrium. This proves that there is a relationship between the dependent variable- real gross domestic product and the independent variables - government expenditure, money supply and interest rate in the long run. The estimated coefficients of the short run model indicate no significant relationship between the dependent variable real gross domestic product and independent variables government expenditure, money supply and interest rates taken together but individually a short run relationship exist between the fiscal variable (government expenditure) and real GDP and between the monetary variable (money supply and interest rate) and real GDP. The policy implication of these findings is that more strategies needs to be put in place in order to ensure that monetary and fiscal policies taken jointly positively impacts on economic growth the in the shortrun.
Table of Contents
1.1 BACKGROUND TO THE STUDY
1.2 STATEMENT OF RESEARCH HYPOTHESIS
2.1 Conceptual Framework
2.1.1 The Concept of Policy
2.1.2 Economic Growth
2.1.3 Fiscal Policy
2.1.4 Monetary Policy
2.2 THEORETICAL REVIEW
2.2.1 Fiscal Policy and Economic Growth
2.2.2 Monetary Policy and Economic Growth
2.3 EMPIRICAL REVIEW
3.1 RESEARCH METHOD
3.1.1 Model Specification
4.1 RESULTS AND FINDINGS
4.2 DATA ANALYSIS
5.0 Conclusions and Recommendations
Research Objectives and Themes
The primary objective of this study is to conduct a comparative analysis to investigate the relationship between government fiscal and monetary policies and economic growth in Nigeria over the period of 1981-2014, with the aim of determining the effectiveness of these policies in stabilizing the economy.
- Impact of government expenditure on real gross domestic product (RGDP).
- Influence of money supply and interest rates on Nigeria's economic growth.
- Comparative analysis of fiscal versus monetary policy potency.
- Identification of long-run and short-run dynamic relationships using econometric modeling.
- Formulation of policy recommendations for economic stabilization.
Excerpt from the Book
1.1 BACKGROUND TO THE STUDY
Economic growth is a major macroeconomic objective for most economies. Among other factors which are likely to influence this objective is the issue of policies which is very cardinal in determining the growth of the economy. In theory Keynesians and Neoclassical economists provided various macroeconomic policy tools of government intervention which are broadly grouped into fiscal and monetary policies While monetary policy has to do with the process by which monetary authorities of a country controls monetary aggregates (such as money supply, interest rate, inflation rate etc.) in order to influence the economy. Fiscal policy is all about how the government uses its revenue (taxes) and expenditure (spending) to influence the economy.
The government intervenes in undertaking fundamental roles of allocation, stabilization, distribution and regulation especially where or when market proves inefficient or its outcome is socially unacceptable (Usman A. et al: 2011). An efficient policy could serve as a booster for economic growth in a nation and make it better-off while an inefficient policy producing undesired and unintended effects could impede the growth potential of an economy and make it worse-off.. This forms the rationale behind a good macroeconomic or public policy.
Most times what the government receives as revenue is usually been channeled as expenditures. Therefore when the government revenue increases it is also expected that expenditure will increase. According to the Keynesian economics when government increases expenditure and reduces tax, aggregate demand is stimulated and therefore productivity. But what determines the impact of government expenditure on economic output is dependent on the kind of expenditure it is been channeled to. Government expenditure can be productive and unproductive (or wasteful).
Summary of Chapters
1.1 BACKGROUND TO THE STUDY: Outlines the importance of fiscal and monetary policies as macroeconomic tools for achieving economic growth in Nigeria.
1.2 STATEMENT OF RESEARCH HYPOTHESIS: Defines the null hypotheses regarding the influence of fiscal and monetary policies on economic growth.
2.1 Conceptual Framework: Provides theoretical definitions for policy, economic growth, fiscal policy, and monetary policy.
2.2 THEORETICAL REVIEW: Discusses the underlying Keynesian models and the theoretical relationship between government spending, money supply, and national output.
2.3 EMPIRICAL REVIEW: Examines previous studies and literature on the correlation between social/government expenditures and economic performance.
3.1 RESEARCH METHOD: Details the empirical econometric models and specifications used to analyze the variables.
4.1 RESULTS AND FINDINGS: Presents the stationarity test results and initial findings on the data properties.
4.2 DATA ANALYSIS: Uses the VECM and Wald test to evaluate the long-run and short-run impacts of the chosen policies.
5.0 Conclusions and Recommendations: Synthesizes the findings and provides policy suggestions for improving Nigerian economic performance.
Keywords
Fiscal Policy, Monetary Policy, Economic Growth, Nigeria, Government Expenditure, Money Supply, Interest Rate, Gross Domestic Product, Cointegration, Vector Error Correction Model, Wald Test, Macroeconomics, Public Policy, Econometrics, Stabilization.
Frequently Asked Questions
What is the core focus of this research?
The research focuses on the impact of government fiscal and monetary policies on economic growth in Nigeria between 1981 and 2014.
What are the primary themes analyzed?
The study examines government expenditure, money supply, and interest rates as key drivers of real gross domestic product (RGDP).
What is the main goal of the study?
The goal is to determine whether fiscal or monetary policy is more effective in stimulating economic growth in Nigeria and to identify both short-run and long-run relationships.
Which scientific method is applied?
The study utilizes the Johansen Cointegration test, the Vector Error Correction Model (VECM), and the Wald test of coefficients.
What is covered in the main body?
The main body covers the conceptual framework, theoretical and empirical reviews, model specification, data analysis, and the presentation of results regarding policy impacts.
Which keywords define this work?
Key terms include Fiscal Policy, Monetary Policy, Economic Growth, Nigeria, VECM, and Government Expenditure.
What does the Wald test reveal about government expenditure?
The Wald test results indicate that government expenditure significantly impacts real GDP in the short run.
What conclusion does the author draw regarding the potency of the policies?
The author concludes that while both policies are important, monetary policy is found to be more potent in the short run, while fiscal policy shows significant long-run impact.
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- Emmanuel Elakhe (Autor:in), 2016, Fiscal and Monetary Policy and Economic Growth in Nigeria. A Comparative Analysis, München, GRIN Verlag, https://www.grin.com/document/375716
