IMPACT OF FISCAL POLICY ON SELECTED MACRO ECONOMIC VARIABLES IN NIGERIA

Abstract

This study examined “Impact of Fiscal Policy on chosen Macro Economic Variables in Nigeria”. The study made use of Auto Regressive Distributed Lag (ARDL) Model which uses a bounds test approach based on unrestricted error correction model (UECM) to measure the impact of fiscal policy on chosen macro economic variables. The data were obtained from the Central Bank of Nigeria Statistical Bulletin, National Bureau of Statistics and the Federal Inland Revenue Services (FIRS) for the period of 1981-2016. The variables used in the analysis are Government Spending, Public Debt and tax, as independent variables for objective one and Gross Domestic product (GDP) was used as dependent variable, the objective two used Unemployment as the dependent variable, government spending, tax and borrowing as independent variable. The results show that government expenditure and government borrowing as instruments of fiscal policy have statistical significant effect on GDP in Nigeria while that of taxes as fiscal policy instrument has no statistical significant on GDP; and government expenditure as instrument of fiscal policy has statistical significant effect on unemployment level in Nigeria while government borrowing and tax as fiscal policy instruments have no statistical significance on unemployment level. It was recommended that the fiscal stance requires serious re-examination. It is therefore advisable to increase rather than to reduce public expenditure particularly in the area of infrastructure provision and employment generation.