CONSEQUENCES OF VARIABLES OF FISCAL POLICY ON THE GROWTH OF NIGERIAN ECONOMY
The Nigerian government has measures in place to guarantee that the nation stays on the road of economic growth and development. In its effort to accomplish it, this study was designed to empirically examine the Consequences of variables of fiscal policy on the growth of Nigerian economy; using annual time-series data on explained variable, RGDP which was used as a proxy for economic growth and explanatory variables, government total expenditure (GTEXP); government total revenue (GTR); money supply (M2); government deficit expenditure (GDE) and foreign direct investment (FDI) which were used to capture fiscal policy sourced from Federal ministry of finance, Central Bank of Nigeria; Nigeria Bureau of Statistics; countryeconomy.com and World Bank for the periods 1981-2020. The study employed Ordinary Least Square (OLS) Technique; Granger Causality test; and Vector Autoregressive (VAR) technique. The result of OLS technique demonstrated that government total expenditure (GTEXP) and money supply (M2) significantly increased the economy in positive manner; whereas government deficit expenditure (GDE) and foreign direct investment (FDI) insignificantly increased the economy in positive manner; meanwhile government total revenue (GTR) significantly decreased the economy in a negative manner. More so, Granger Causality test upheld the hypothesis of GTEXP, GTR, M2, and FDI does not involve Granger causality of RGDP and the hypothesis that RGDP does not involve Granger causality of GTEXP, GTR, M2, and FDI. However, unidirectional causality runs from GDE to RGDP. The results of vector autoregressive (VAR) technique portrayed that the past period of economic growth was associated with a negative and significant decrease in itself. Whereas, the past periods of government total expenditure, money supply insignificantly depressed economic growth; while past periods of government total revenue, government deficit expenditure and foreign direct investment insignificantly boosted economic growth. Therefore, the study concluded that government should use these variables as back-up tools to run the economy in a smooth manner, and also recommended that government should focus on expansionary aspect of fiscal policy so, that will enhance the productive base of the economy.
Keywords: Fiscal Policy, Economic Growth, OLS Technique & VAR Approach
