The Impact of Monetary and Fiscal Policies on Economic Growth in Nigeria

Abstract

The fact that the major objectives of monetary and fiscal policies are stirred towards achievement and maintenance of sustainable growth and development is highly indisputable. In achieving this, capturing unemployment, price stability, favourable balance of payment, exchange rate stability and a boost in investment being the key macroeconomic variables remain imperative. Concealing this in mind, this study examines the effect of monetary and fiscal policies on economic growth in Nigeria. The study adopted correlation analysis, unit root (Augmented Dicker-Fuller), Ordinary Least Square (OLS) and Granger Causality tests on selected fiscal and monetary policies variables (money supply, interest rate, government revenue, government expenditure, etc). The study showed that money supply exacts greater impact on growth than government expenditure as the former is highly significant to growth. It was, therefore, recommended that monetary authority and the federal government should consider interest rate reduction and practical tax incentives as these will not only improve the level of investment but the immediate state of the economy.