Abstract
In this paper, Granger causality test is implemented within the context of Autoregressive distributed lag (ARDL) framework to determine the directions of causality between a pair of price level, real money supply, government fiscal deficit, interest rate and real output in Nigeria over the period 1970 to 2010. Result of the study shows that in the short run, there is a unidirectional causality running from real money supply to inflation, government deficit to price level, real output to inflation, and interest rate to inflation. The long run results indicate that bidirectional causality runs between the real money supply and price level, and also between price level and interest rate. The results suggest that pro-cyclical has been the practice in Nigerian fiscal policy which has accounted for the country’s public deficit. Therefore, there is a need for fiscal policy rule that will guide all the tiers of government to a particular level of fiscal conduct and budgetary management to the extent of making it credible over time.
Article Details
- Year: 2014
- Volume: 35
- Issue: 4
- Pages: 85 - 112
- Accepted: 06.01.2015
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DOI:
https://doi.org/10.5281/zenodo.21099036 -
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How to Cite?
Jimoh Olajide Raji, Juzhar Jusoh, Mohd Dan Jantan (2014). Real Money Supply, Price and Fiscal Deficit in Nigeria: Evidence from Multivariate Granger Causality Tests. Journal of Economic Cooperation and Development, 35(4), 85-112. https://doi.org/10.5281/zenodo.21099036
