The Saint-Louis Equation Rebirth: Re-Accessing Fiscal and Monetary Policies Mix in Nigeria

Timilehin John Olasehinde (), Mutiu Afolabi, Adeyemi Kamar Kayode (), Adigun Saidat Motunrayo (), Federal Polytechnic Offa () and Babatunde Kowe ()
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Timilehin John Olasehinde: Ekiti State University
Adeyemi Kamar Kayode: Federal Polytechnic Offa
Adigun Saidat Motunrayo: Federal Polytechnic Offa
Federal Polytechnic Offa: Adekunle Ajasin University Akungba
Babatunde Kowe: Ekiti State University

Acta Universitatis Danubius. OEconomica, 2018, issue 14(7), 723-736

Abstract: This study restates the Saint-Louis equation to reinvestigates the relative effectiveness of fiscal and monetary policies on the Nigerian economy. This study made use of annual data from 1981 to 2015. The unit root test revealed that the variables employed contained a unit root. An Autoregressive Distributed Lag (ARDL) technique is used in this study, and cointegration test among the variables was passed using the ARDL bound test technique. The ARDL parameter estimates are used to compute impulse response function in order to shed light on fiscal-monetary impacts’ puzzle in the existing literature. The impulse responses show that, GDP responses to fiscal and monetary policy shocks are mixed in signs. Ultimately, the impulse responses allow us to find out that the very long run responses of GDP to fiscal and monetary policies shocks are negative and positive. Conclusively from our findings, monetary policy is effective than fiscal policy in Nigeria. Based on our findings, we suggest that the government and the policymakers should try to simultaneously make fiscal and monetary policies formulation in such a way that their temporal and cumulative effects on the economy for growth and sustainability motive would be positive.

Keywords: Saint-Louis Equation; fiscal policy; monetary policy; ARDL; Nigerian Economy (search for similar items in EconPapers)
Date: 2018
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Journal Article: The Saint-Louis Equation Rebirth: Re-Accessing Fiscal and Monetary Policies Mix in Nigeria (2019)
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