Dynamic Analysis of the Effect of Fiscal Deficit on Inflation in Nigeria

Ibrahim Abdulhamid Danlami (), Mohamad Helmi Bin Hidthiir and Sallahuddin Hassan

Academic Journal of Economic Studies, 2019, vol. 5, issue 2, 159-165

Abstract: The study is aimed at investigating the short-run and long-run dynamic effects of fiscal deficit on inflation in Nigeria. Autoregressive Distributed Lag Model (ARDL) was applied to time series data from 1970–2016 (of Nigeria). The result, of the estimation, reveals that fiscal deficit is inflationary during the short-run as well as the long-run of the period of study. Findings of the research are limited to Nigeria whose data were used, based on ARDL as the econometrics techniques applied, for a period 1970–2016. The fiscal spending of Nigerian government is one of the factors contributing to inflationary pressure in the country as seen in the findings of the research. The paper was able to prove empirically, the existence of the positive effect of fiscal deficit on inflation in Nigeria, using Nigerian data and also suggest for decision makers in the country to be cautious in terms of the way, the Nigerian government is financing its expenditure through borrowing and fiscal spending.

Keywords: ARDL; Commonwealth; Fiscal Deficit; Inflation; Nigeria (search for similar items in EconPapers)
JEL-codes: E30 E31 E50 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:khe:scajes:v:5:y:2019:i:2:p:159-165

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