AGGREGATE DEMAND AND FISCAL POLICY ADJUSTMENT IN NIGERIA: EVIDENCE FROM TWO STAGE LEAST SQUARED AND SIMULATION EXPERIENCE

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AGGREGATE DEMAND AND FISCAL POLICY ADJUSTMENT IN NIGERIA: EVIDENCE FROM TWO STAGE LEAST SQUARED AND SIMULATION EXPERIENCE

Journal Title: Gusau Journal of Accounting and Finance - Year 2020, Vol 1, Issue 2

Abstract

This study examined the shocks in aggregate demand to fiscal policy adjustment in Nigeria using time series annual data from 1986-2020.The study constructs simple structural macroeconomic models made up of two blocks: consumption and investment sectors that contain seven variables; four are behavioural equations and two are identities. The models were estimated and analyzed using Two Stage Least Square methods and a simulation experiment was also conducted on the simple structural macroeconomics models. The study finds that fiscal policy variables (Tax, government spending and public debt) have significant influence on aggregated demand in Nigeria during the period under investigation. Similarly, the simulation shows magnificent tracking power of the actual from the baseline simulation as the nature of the movement suggested. The study, therefore, recommends that the government should encourage expansionary fiscal policy by expanding public spending channeled to infrastructure and other sectors of the economy like commercial farming and creation of utility. These have to been done through proper monitory as funds usually diverted to private pockets, decrease in taxes as it expands the purchasing power of the citizens which influence aggregate demand and output.

Authors and Affiliations

Titus Wuyah Yunana, Umar Yunusa Sa’id

Keywords

EP ID EP709198
DOI -
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