Fiscal and Monetary Policy and Economic Growth in Nigeria. A Comparative Analysis

Master's Thesis from the year 2016 in the subject Economics - Other, grade: 3.67, , course: Development Economics, language: English, abstract: 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.