ECONOMIC POLICIES AND THE GROWTH OF THE NIGERIAN ECONOMY: THE ROLE OF MONETARY AND FISCAL POLICIES

Abstract

Empirical evidence from Nigeria shows that there is no consensus on the impact of monetary and fiscal policies on economic growth. This study therefore examined the impact of monetary and fiscal policies on economic growth in Nigeria. Specifically, the study investigated the impact of monetary policy rate, reserve requirement and Treasury bill rate (for monetary instruments), and fiscal deficit, total government expenditure, and government tax revenue (for fiscal policy instruments) on economic growth in Nigeria. Economic growth is proxied by per capita real gross domestic product. Augmented Dickey-Fuller (ADF) unit root test, autoregressive distributed lag (ARDL) approach to cointegration, error correction model (ECM), and Granger causality test were used to analyse annual time-series data from 1981 to 2021. The estimated regression result indicated that monetary policy rate, reserve requirement, treasury bill rate, and fiscal deficit have insignificant negative impact on economic growth. On the other hand, total government expenditure has significant positive impact on economic growth while government tax revenue has insignificant positive on economic growth. The Granger causality showed that the explanatory variables have no causality with economic growth. Among other things, it is recommended that government officials responsible for the implementation of government economic policies should be transparent, honest and efficient to maximize the effects of policy actions on economic growth.