Academic Journals Database
Disseminating quality controlled scientific knowledge

An Empirical Analysis of Fiscal Deficits and Inflation in Nigeria

ADD TO MY LIST
 
Author(s): VINCENT N. EZEABASILI | JOSEPH N. MOJEKWU | WILSON E. HERBERT

Journal: International Business and Management
ISSN 1923-841X

Volume: 4;
Issue: 1;
Start page: 105;
Date: 2012;
Original page

Keywords: Fiscal deficit | Inflation | Cointegration | Money supply | Nigeria

ABSTRACT
The relationship between fiscal deficits and inflation has provoked considerable interest in the macroeconomics literature. While the theory postulates that fiscal deficits lead to inflation, empirical research has been less conclusive about the relationship. This paper reexamines the issue in the context of a developing country, Nigeria, using data over 1970–2006, a period of persistent inflationary trends. We adopted a modeling approach that incorporates cointegration techniques and structural analysis. The results reveal a positive but insignificant relationship between inflation and fiscal deficits in Nigeria. We did not also find any strong evidence linking past levels of fiscal deficits with inflation in Nigeria during the period. Rather, we report a positive long run relationship between money supply and inflation in the Nigerian economy, suggesting that money supply is procyclical and tends to grow at a faster rate than inflation rate. Key words: Fiscal deficit; Inflation; Cointegration; Money supply; Nigeria
Why do you need a reservation system?      Save time & money - Smart Internet Solutions