Determinants of fiscal policy behavior in Nigeria

  • Received October 15, 2018;
    Accepted February 6, 2019;
    Published April 8, 2019
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  • Article Info
    Volume 16 2019, Issue #2, pp. 1-13
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    1 articles

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The study investigated the factors that determine fiscal behavior in Nigeria. The vulnerability of fiscal policy framework in Nigeria to different shocks and the attendant effects on the behavior of fiscal policy are parts of the reasons that prompted this research work. Annual data between 1980 and 2015 on core fiscal variables such as government revenue, government expenditure, fiscal balance, public debt, as well as other variables such as oil price, exchange rate, and inflation rate commodity price among others, are used. The Auto-Regressive Distributed Lag ARDL estimating technique is used to analyze both the long-run and short-run effects of these variables on fiscal behavior in Nigeria. Findings from the study show that fiscal policy in Nigeria is highly vulnerable to shocks from these variables mostly in the short run. Notwithstanding, variables like government revenue, government expenditure, regime of administration, oil price and commodity price volatilities all have sustained effects till the long-run periods. It was discovered that oil price movements is not the only external factor that has pronounced effects on fiscal behavior, but commodity prices volatility generally constitutes an important influential factor in determination of fiscal policy behavior in Nigeria.

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    • Figure 1. Normality test
    • Table 1. Unit root test
    • Table 2. Lag length for FB
    • Table 3. Lag length for GE
    • Table 4. Lag length for GR
    • Table 5. Lag length for ER
    • Table 6. Lag length for DEBT
    • Table 7. Lag length for EXR
    • Table 8. Lag length for INF
    • Table 9. Lag length for GDPGR
    • Table 10. Lag length for DUM
    • Table 11. Lag length for OILPVOL
    • Table 12. Lag length for COMPVOL
    • Table 13. Lag length for K
    • Table 14. ARDL regression for fiscal policy shocks and fiscal balance
    • Table 15. ARDL Short-run and long-run forms for fiscal policy shocks and fiscal balance
    • Table 16. ARDL bound test for fiscal behavior
    • Table 17. Breusch-Godfrey serial correlation LM test
    • Table 18. Heteroskedasticity Test: Breusch-Pagan-Godfrey