AN ECONOMETRIC ANALYSIS OF THE IMPACT OF FISCAL POLICY ON NIGERIA ECONOMY.
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AN ECONOMETRIC ANALYSIS OF THE IMPACT OF FISCAL POLICY ON NIGERIA ECONOMY.
Chapter one
INTRODUCTION
1.1 Background of the Study
Any country’s economic policy, whether developed, developing, or undeveloped, must include a set of core aims and objectives. Any attempt to undermine these presupposed core aims will, in no small part, lead to little or no concrete success attained by the stated country’s economy.
However, good developmental policies, together with a set of well-formulated and implemented aims, ensure balanced and stable economic growth, which reflects beneficial improvements in people’s social, cultural, political, and economic life.
It is worth noting that the emphasis placed on the planned goals and objectives differs each country, but they will all be incorporated into the concerned country’s overall economic strategies.
Nonetheless, the government employs a variety of strategies and methods to reorganise, re-direct, and sustain the economy’s continual and stable growth.
The most prevalent of these policies are fiscal policy, exchange rate policy, external trade policy, monetary policy, external debt management policy, and public sector reform policy.
The goal of this research is to focus solely on fiscal policy and its effects on the real economy. Fiscal policy is the government’s management of expenditure resources and taxing power to manage the economy. It is a set of policies aiming to modify and control the economy by regulating taxes and government spending.
The fiscal policy objectives, however, are met through a variety of techniques. These methods include reducing government spending and running a budget surplus to ensure that the federal budget is balanced, increasing or decreasing taxation, borrowing internally and externally, printing money” from the country’s past reserves, and so on.
This is intended to influence economic activity in a desired direction and achieve certain macroeconomic policy objectives. The goal of this research is to focus solely on fiscal policy and its effects on the real economy.
1.2 Statement of Problem
It is an undeniable fact that the primary goals of any country are to achieve growth in the real sector, which leads to an improvement in the people’s standard of living.
To this purpose, efforts are being made to keep the budgetary policy effective. However, the purpose of this study is to examine the impact of fiscal policy on the Nigerian economy and how it has aided its development.
1.3 Aim and Objectives of the Study
The study aims to examine the influence of fiscal policies on the Nigerian economy.
1. Examine the influence of fiscal policies on the general price level.
2. Determine the impact of fiscal policy on the amount of money supply.
3. To discuss the impact of fiscal policy on government spending.
1.4 RESEARCH QUESTION.
To achieve the goal of this research project, it will seek to answer the following research questions.
§ How has Nigeria’s fiscal policy affected its economy?
§ Does fiscal policy affect the money supply?
§ How does time lag in fiscal policy execution influence Nigeria’s real sector?
What are the most effective ways for fiscal policy to favourably impact the actual economy?
1.5 Research Hypothesis
1. Ho: there is no major relationship between fiscal policy and the overall price level.
Hello: There is a considerable relationship between fiscal policy and the general price level.
2. Ho: There is no major relationship between fiscal policy and the money supply.
Hi: There is a considerable link between fiscal policy and the money supply.
3. Ho: There is no significant association between fiscal policy and government expenditures.
Hello, there is a considerable relationship between fiscal policy and government expenditure.
1.5 Research methodology
Econometric analysis will be utilised to test the link between dependent and independent variables. This will require many regression analyses. Secondary data will be used, which is sourced from CBN publications. F.O.S. e.t.c., the model specifications are as follows:
GDP equals bo + blPRC + b2xMSC + b3GEX + b4TAX + u.
Where,
Y = GDP (Gross Domestic Product at Market Prices); dependent variable.
X1 = Price Level: Independent Variable
X2 = Money Supply; Independent Variables
X3 = Government expenditure: independent variable.
X4 = Tax: independent variable.
bo = constant phrase.
b1 = The coefficient of the parameter X1.
b2 = Coefficient of parameter X2.
b3 = Coefficient of parameter X3.
b4 = The coefficient of the parameter X4.
u = Error in the stochastic term
Sources of Data:
Secondary data will be used for this research, which will span 30 years, from 1980 to 2009. The primary sources of data and information will be the Central Bank of Nigeria (CBN), numerous publications, and the Ministry of Finance’s statistical bulletin.
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