The Effect of Fiscal Policy on Financial Sector Development in Sierra Leone: A Time Series Approach (Published)
This study investigates fiscal policy impact on financial sector development in Sierra Leone between 1980 and 2015. The objective of the study is to establish the long run relationship between fiscal policy variable and financial sector development. The study used a quantitative approach; the model was formulated with Private sector credit used as a proxy variable for financial sector development. This was regressed against gross domestic product, money supply, real interest rates, inflation and total tax revenue. The study used error correction model to estimate both long term and short term effects of the explanatory variables on the dependent variables in the empirical functions. The unit root tests shows that variables in the equations were I(1) variables, meaning they were stationed at first difference using both the Augmented Dickey Fuller and Philip Pheron tests. The Johansson co integration tests concludes that there are more than one co-integrating factors in each empirical function, therefore a long run relationship exists between private sector credit and its explanatory variables. To validate the quality of the data for the use of vector auto regression, all of the tests were conducted including; lag length criteria test, serial correlation test, normality test, stability test. The result from the private sector credit and fiscal and non-fiscal variables in Sierra Leone contradicts most of the theoretical and empirical literature on financial sector development. The conclusion is that even when we are expecting a negative relationship between private sector credit and money supply, real interest rates, total tax revenue and inflation, the results all came out positively and significantly in long run financial economic analysis. This study shows that the private sector is willing to borrow regardless of the interest rate in the economy and the level of taxation. Basically the risk appetite in the private sector shows the level of desperation of private institution to access short to medium term capital. This might explain the reason for the high non-performing loans (NPL) in the economy of Sierra Leone.
Given Nigeria’s position as an economic giant in the sub-Saharan Africa, analyzing the country’s macroeconomic policy coordination requires an understanding of its effectiveness in boosting the economy wide aggregate including stock market performance. This paper explores the effectiveness of intertemporal policy mix in fostering stock market development in Nigeria between 1986 and 2018. The specific objective focused on the effect of fiscal and monetary policy initiatives comprising public expenditure, public debt, treasury bill rate and broad money supply on the value of stock traded as a ratio of GDP. Year-end time series data on the variables were analyzed using error correction mechanism (ECM), diagnostics tests and descriptive statistics. The Philips-Perron unit root results reveal that the variables are stationary at first difference. Additionally, the cointegration test show evidence of long run relationship among the variables. It was observed from the estimated parsimonious ECM result that broad money supply and public expenditure positively and significantly influenced the value of stock traded. This indicates that public spending and monetary aggregates are the channels which monetary and fiscal policies foster the development of the stock market development in Nigeria. Given the findings, it is recommended for policy makers to synergize fiscal and monetary policy initiatives in order to foster robust and sustained development of the stock market in Nigeria.
The Effect of Fiscal Policy on Economic Development:A Comparative Study on Gross Domestic Product and Human Development Index in Nigeria 1990-2017 (Published)
This study sought to provide more insights on the topic “fiscal policy and economic development” by extending its focus to examining the relationship between fiscal policy and economic development using human development index (HDI) as a more comprehensive representation of human and economic progress than the gross domestic product (GDP). The study adopts an ex-post facto research design to enable the use of Nigerian time series data from 1990 to 2017in an Ordinary Least Square (OLS) regression technique for analyses. Findings reveal that fiscal policy variables such as government revenue and expenditure have negative effect on the gross domestic product but positive and significant on human development index of Nigeria, while government debt has positive effect on GDP and significantly negative effect on HDI. Results further reveal interesting outcomes on the effect of fiscal policy on Nigeria’s economic development such trade depicting a negative and significant effect on HDI but positive and insignificant for GDP. The study, therefore recommends that using HDI to measure the effect of fiscal policy may be a better approach to measuring economic development. Also, that the government of Nigeria should engage in more productive and try to improve on the mechanisms to grow its revenue to enhance economic development in Nigeria.
Rethinking the effectiveness of fiscal allocation strategy: A focus on economic development in Nigeria (Published)
This paper developed and estimated two autoregressive distributed lag (ARDL) models to explore the empirical relationship between fiscal policy allocation strategies and economic development in Nigeria. Specifically, the impacts of public expenditures on social and community services, economic services and administration on poverty headcount and income inequality were examined between 1990 and 2017. The unit root test results show that the variables are mixed integrated. The ARDL bounds test results revealed that long run relationship exists among the variables in each of the models. The ARDL estimates reveal that public capital expenditure on economic services in addition to expenditure on social and economic services have significant positive impact on poverty headcount in the short run. The result further indicates that expenditure on administration negatively influenced the poverty level. More so, expenditure on economic services and income inequality are relatively related in the short run while public expenditure on social and community services play significant in reducing income inequality in both short and long run. Therefore, it is recommended that fiscal policy allocation should made adequate provision for investments in social and economic services in order to create better opportunities for everyone in a view to reducing the income divide within the Nigerian economy.
The present investigation inspected the effect of fiscal approach estimated by (Government use, Government incomes, inward open obligation, outside open obligation) notwithstanding fares and swelling factors on the Jordanian GDP development. Fiscal approach assumes a huge job in a monetary arrangement because of its capacity to acknowledge objectives went for by a national economy. Its instruments are viewed as one of the primary financial devices to accomplish monetary development and beat obstructions to monetary soundness. Notwithstanding its distributional and pro impacts, financial arrangement has steadiness initiating impacts, for example, government spending and expenses which impact total interest, along these lines influencing in general monetary factors and financial development. The significance of fiscal arrangement radiates from the way that open spending is viewed as the prime drive for financial movement of a nation by affecting the dimension of total interest and subsequently monetary development. Open incomes fill in as the principle wellspring of salary for a nation while open obligation is a piece of the administration’s spending, regardless of whether inside or outer. This paper introduces a utilization of a hypothetical model to survey the impacts of monetary arrangement on financial development.
The study determines the effect of government policies in both monetary and fiscal policies on price stability in Nigeria. Secondary data were sourced from CBN statistical bulletin for GR, GE, CRR, MPR & CPI. The study using OLS technique discovered that the combination of both monetary and fiscal instruments impacted on consumer price index in Nigeria within the period of review and concludes that regardless of the mixed individual impacts of the variables; government policies were able to manage consumer price index to a considerable extent. Thus, recommends enhanced fiscal procedures and monetary policies to facilitate desired price stability.
The study empirically examined the impact of fiscal policy on the economy of Nigeria between 1994 and 2014. Secondary method of data collection was used to generate data for this study and the sources of the data included annual reports /accounts and CBN statistical bulletin (2015). Multiple regression of ordinary least square estimation was the tool used to analyse the data in this study. In the model, real GDP (as dependent variable) was regressed on capital expenditure, recurrent expenditure, tax revenue and external debts. The study has revealed, that there exists no significant relationship between capital expenditure, recurrent expenditure, tax revenue and the real GDP representing the economy. However, the study found a significant negative relationship existing between external debts and the real GDP. This supports the Keynesian view of government active intervention in the economy using appropriate various policy instruments. The study therefore recommends that: Government should use fiscal policy to complement the adoption of effective monetary policy and maintain the rule of law to promote stability in the Nigerian economy. Government should ensure that capital expenditure and recurrent expenditure are properly managed in a manner that it will raise the nation’s production capacity and accelerate economic growth even as it reduces external borrowing.
Most industrialized countries over the years have passed through the agrarian era. In fact, the industrial sector takes its roots from the agricultural sector. In a developing nation, government fiscal responsibility is very central to all facets of development including agriculture. The study thus seeks to examine the impact of fiscal policy on the growth of agricultural sector in Nigeria between 1981 and 2013 using Error Correction Model (ECM). Unit root tests were conducted on each of the variables to avoid spurious regression results. Stationary variables were subsequently used for the analysis. The co-integration results showed that long run equilibrium relationship exists among the variables. The findings from the study revealed that custom and excise duties (CED) though statistically significant, relates negatively with volume of agricultural outputs (VAO). It shows that the amount of tax imposed on agricultural exports has not improved its productions and thus has a dampening multiplier effects on its growth. Value added tax (VAT) was however found to have influenced the growth of VAO positively and significantly. It shows that the amount of VAT imposed on agricultural outputs has improved the growth of the agricultural produce. The total government expenditures on agricultural sector were found to have negatively influenced agricultural growth in Nigeria. It showed that the amount of government expenditures towards the growth of the sector has not been favorable. Government capital allocation and expenditure to agriculture is relatively low and the actual expenditure falls short of budgeting expenditure. The rate of under spending was found to have been higher for agriculture than for any other economic sectors as large proportion of the funds allocated to agriculture has not gone directly to farmers. Suggestive from the analysis therefore is that Government should increase her budgetary allocation to this sector in a consistent manner because of its importance to the national economy, hoping that with proper monitoring of fund, it would contribute more significantly to the economy of the country. Customs and excise duties on agricultural exports should be stream-lined and more incentives should be given to rural farmers since they covered the larger population in agricultural sector.