SOURCE:

Faculty: Management Sciences
Department: Banking And Finance

CONTRIBUTORS:

Obioha, V. C.
Ibenta, S.N.O.
Okaro, C. S.

ABSTRACT:

This study examined the effect of fiscal policy on selected macroeconomic variables in Nigerian from 1981 to 2016. This study was necessitated by the unending debate on the macroeconomic effects of fiscal policy. Firstly, theoretically and empirically, there is no harmony on the true effects of fiscal policy on macroeconomic variables. Secondly, we are not even sure about the direction of the responses of some variables, let alone the magnitude of those responses. In the light of this, this study is set out to examine the effect of fiscal policy reflected with recurrent expenditure, capital expenditure and fiscal deficit on real gross domestic product, industrial development, money supply, inflationary trend, interest rate and exchange rate volatility. A hypothetico-deductive research design was adopted using secondary data that were sourced from Central Bank of Nigeria statistical bulletin of 2016. The models were estimated using the Autoregressive Distributive Lag (ARDL) model. The findings of the study revealed that recurrent expenditure and capital expenditure have significant effect on money supply; capital expenditure and fiscal deficit have significant effect on real gross domestic product; real gross domestic product, industrial development, inflation rate, interest rate and exchange rate are not significantly affected by variations in recurrent expenditure, capital expenditure and fiscal deficit. On the basis of the findings, to engender sustainability in real gross domestic product, government should spend more on capital investments as opposed to recurrent consumption; Government should encourage and maintain spending geared towards development of the industrial sector and simultaneously develop the nation’s infrastructural facilities, in order to encourage domestic investors and attract more foreign investors.