Tag Archives: OLS

Impact of Price Instability on Unemployment and Economic Growth in Nigeria: An Empirical Analysis (Published)

This study is an empirical examination of the impact of price instability on unemployment and economic growth in Nigeria between 1986 to 2015. Main variables used in this study are unemployment, inflation rate (proxy for consumer price index), GDP growth rates, Foreign Direct Investment, Investment (proxied by Gross Fix Capital Formation) Interest Rate, Imports, Exports, Exchange Rate and Per Capita Income. The sources of data are statistical bulletins published by World Bank Development Indicators (WBDI) and Central Bank of Nigeria Statistical Bulletin 2015 respectively. There are three regression equations in which the relationship between dependent and independent variables have been tested. The first model is explaining the effect of inflation or price instability and other macroeconomic variables on GDP in Nigeria. The second model explains the effects of unemployment and other economic variables on real GDP while the third model is formulated to describe the effect of macroeconomic variables on unemployment in Nigeria. To achieve these objectives, stationarity tests were conducted with simple Ordinary Least Square using E-views version 8 software.  Results from Augmented Dickey Fuller and Philips-Perron unit root test reveals that all the series in the models were stationary, with evidence of a unique long run relationship among the variables in the model. Findings from the OLS regression output reveals the coefficients of imports, exports, exchange rate and manufacturing growth rate as having negative effect on the key dependent variables of gdp-growth rate, price instability and unemployment rate. On the contrary, the coefficients of investment, per capita income and foreign direct investment show positive relationship with the dependent variables in the model. Major policy recommendations of this study are as follows: Government should embark on policies that will reduce the number of imported goods drastically and encourage local production and consumption to encourage domestic industries. This will help reduce unemployment and inflation in Nigeria and improve the gross domestic product figures greatly. Furthermore, over the years, foreign partners in Nigeria has had cause to repatriate their investible funds back to their shores as Nigeria increasingly became unsafe destinations for businesses owing to streams of violence and kidnappings across the country. Government should therefore engage the various agitators and stakeholders across the nation such as the Niger-Delta militants, IPOD/MASSOB and Fulani herdsmen with a view to finding lasting solutions to their demand for genuine peace to be entrenched in the polity. This is one sure way to encourage more foreign inflow of capital for economic growth.

Keywords: OLS, Price Instability, Unemployment, economic growth

The Effect of Variations in Foreign Exchange on Financial Depth: Evidence from Nigeria (Published)

This study is an empirical analysis of the effect of variations in foreign exchange on the financial depth of Nigerian economy. Nigeria has seen about fifteen distinct foreign exchange variation incidences from 1962 to date with diverse effects on the economy of the nation in general and financial depth in particular. In line with the objectives of this study, secondary data were obtained from Central Bank of Nigeria Statistical Bulletin covering the period of 1985 to 2015. The ordinary least square multiple regression analytical method was used for the data analysis. Some statistical tools were employed to test the statistical significance of the variables. The analysis started with the test of stationarity of the Nigeria’s time series data. The empirical study found that the data were not stationary and then employed the Dicky Fuller (ADF) test statistic to make it stationary. Hence the OLS regression was applied to the data to determine the overall effect of variations in foreign exchange on the financial depth of the economy. The multiple regression results revealed that the variations in foreign exchange in Nigeria have not had the anticipated positive effect on the depth of the Nigerian financial sector. This implies that the Nigerian economy has been remarkably unsuccessful in experiencing constant exchange rate which is capable of attracting foreign investment. Hence, our findings suggest a stable exchange rate regime and an enhanced loan policy to maximize good economic performance.  To reap the benefits of stable exchange rate, this study recommends that the Nigerian government should be conscious of over-dependence on oil and promote increased production in the non-oil sector of the economy by creating a level-playing field for private sector led activity.

Keywords: Dicky Fuller, Financial Depth, Foreign Exchange Variation, OLS, Stationarity

Testing for Wagner’s Law on Greek Economy (Published)

This paper examines the plausibility of Wagner’s ‘law’ for Greece for the period 1948 – 2010. The paper uses modern time-series econometric techniques boarding on co integrations analysis to test for the validity of Wagner’s law, which states that the growth of public expenditure can be explained as a result of the increase in economic activity. The results of the causality test indicate that there is no evidence to support either Wagner’s Law or Keynes’s hypothesis for Greek economy. Furthermore, evidences from Johansen Maximum Likelihood co-integration test and LSEM both reveal that Wagner’s law is not supported for Greece. These results suggest that despite the often vocal opposition from the country’s powerful labor unions and the general public, Greek Government should continue with the policy of cutting government spending, downsizing of the public sector, and reforming the labor and pension systems to promote greater private sector involvement in economic activities.

Keywords: OLS, Wagner’s Law; Co-integration; Causality; Government size; Growth