Fiscal policy measures and balance of payments in Nigeria
Journal Title: Scholars Journal of Economics, Business and Management - Year 2015, Vol 2, Issue 9
Abstract
Abstract: The paper investigates fiscal policy measures and balance of payments in Nigeria.The main objective of this study is to examine the extent to which fiscal policy measures have influenced the BOP position in Nigeria during the period under study. The study utilized aggregate annual data from 1980 to 2012. The data was analyzed with the co-integration/ECM method. The major findings are: the test for stationarity using Augmented Dickey Fuller (ADF) showed that all the variables were not stationary in levels but were stationary in first difference. The Johansen-Juselius co-integration techniques were employed in testing for long run equilibrium relationship among the variables and the results indicated that cointegrating relationship was found among the variables. The parsimonious ECM result reveals that about 80% of the systematic variation in the dependent variable (BOP) is explained by the three independent variables which are Government Expenditure (GXP) and Government Tax Revenue (GTR) and Government Debt (GTD). Furthermore, the result revealed that government tax revenue has positive and significant effect on BOP in Nigeria, while government expenditure and debt have negative and significant impact on BOP in Nigeria based on the magnitude and the level of significance of the coefficient and p-value. The result also reveals that there is long run relationship between fiscal policy and BOP, as evidenced by the ECM. From the result so far, it is obvious that fiscal policy measures are effective in achieving a favourable balance of payments in Nigeria. The paper concluded that the success of fiscal policy in promoting favourable BOP depends on the level of public revenue available, the direction of public expenditure and its implementation. On the basis of the findings, we recommend amongst others that expansionary fiscal policy measures should be encouraged as they play vital role for the growth of the BOP in Nigeria. Also export promotion and import substitution strategies to increase the non-oil exports in order to achieve a favourable BOP in order to achieve a favourable BOP. Keywords: BOP, Expansionary, ECM, Fiscal Policy.
Authors and Affiliations
Ewubare Dennis Brown, Obayori Joseph Bidemi
Keywords
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