Growth Stabilisation Effects of Macroeconomic Policy Coordination in Nigeria: An Econometric Analysis

David Umoru and Harrison Ogbeide Eromosele

Academic Journal of Economic Studies, 2020, vol. 6, issue 1, 51-60

Abstract: The study substantiates effects of policy coordination between fiscal and monetary policies correspondingly on economic growth in Nigeria. We specified dynamic simultaneous equation to describe mutual quest for macroeconomic stabilization within coordinated policy framework between fiscal and monetary policies in Nigeria. Employing annual data, from 1980 to 2017 with application of GMM technique, implication of results is that fiscal policy and monetary policy variables mutually explain output growth significantly with view to stabilizing Nigerian economy. Indeed, with policy coordination between monetary and fiscal authorities, output growth is significantly remarkable. This advances validation of optimal policy mix for macroeconomic stabilization. Fiscal policy is countercyclical in its effects which conform to Keynesian stabilization assertion while monetary policy was is pro-cyclical. This result could be implying fiscal dominance in determination of price level. In effect, it could be said that size of Nigerian financial system is small. So, we recommend that government should enable institutional environment that foster relationship between authorities of fiscal and monetary policies.

Keywords: Output stabilization; policy coordination; economic growth; pro-cyclical; counter-cyclical (search for similar items in EconPapers)
Date: 2020
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