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Budget Deficits, Money Growth and Price Level in Nigeria

Jude Chukwu

African Development Review, 2013, vol. 25, issue 4, 468-477

Abstract: The study investigates the long‐run causal relationship amongst budget deficits, money growth and price level for Nigeria between 1971 and 2008 inclusive. The empirical findings predict a long‐term cointegrating relationship with unidirectional causality running from budget deficit to money supply growth and then from money supply growth to price level in the Toda and Yamamoto () sense. Thus, the Sargent and Wallace () ‘Unpleasant Monetarist Arithmetic’ hypothesis holds for Nigeria. L'étude porte sur la relation de long terme entre causalité déficits budgétaires, la croissance de l'argent et le niveau de prix pour le Nigeria entre 1971 et 2008 inclus. Les résultats empiriques prédisent une relation à long terme avec cointégration causalité unidirectionnelle allant du déficit budgétaire à la croissance de la masse monétaire, puis, à partir de la croissance de la masse monétaire au niveau des prix dans les Toda et Yamamoto (1995) sens. Ainsi, Sargent et Wallace (1981) ‘arithmétique monétariste désagréable’ hypothèse se vérifie pour le Nigeria.

Date: 2013
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