Optimal Fiscal and Monetary Policy Under Uncertainty in Nigeria: A Markov-Switching Dynamic Approach

Rufus Adebayo Ajisafe, Kazeem Fasoye, Musbau Olaniyan Fatai and Folorunsho Ajide
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Rufus Adebayo Ajisafe: Obafemi Awolowo University,Ile-Ife,Osun State,Nigeria
Kazeem Fasoye: Department of Economics,Obafemi Awolowo University,Ile-Ife,Osun State, Nigeria
Musbau Olaniyan Fatai: Obafemi Awolowo University,Ile-Ife,Osun State, Nigeria

Romanian Journal of Economics, 2022, vol. 55, issue 2(64), 113-128

Abstract: The effectiveness of the conduct of fiscal and monetary policy under uncertainty in Nigeria between 1980 and 2020 was examined using a Markov-switching dynamic regression model to b estimate the uncertainty as portrayed by monetarists/ neo-Keynesians. The results reveal an ineffective conduct of fiscal and monetary policy under uncertainty in Nigeria as it is shown that the uncertainty about the impact of fiscal and monetary policy in the future surpasses the existing uncertainty as indicated by the higher probability values. b The study recommends a dominance of monetary policy rather than fiscal policy if the policy thrust of the government is to reduce policy uncertainty in the economy both at current and future periods.

Keywords: monetary policy; fiscal policy; markov switching; regime; uncertainty (search for similar items in EconPapers)
JEL-codes: E52 H3 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ine:journl:v:55:y:2022:i:64:p:113-128

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