MACROECONOMIC POLICY SHOCKS IN A LARGE INFORMAL ECONOMY IN NIGERIA: A DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM APPROACH

The approach and conduct of the macroeconomic policy play an important role to the provision of sound economic policies that addresses business cycles or macroeconomic fluctuations. In determining the approach of macroeconomic policy in Nigeria, the structure of the economy characterised by a large informal economy should also be taken into consideration given its importance in providing employment. Hence, this thesis opines that the design of monetary and fiscal policy (macroeconomic policies) in Nigeria, needs to carefully take into consideration how a large informal economy could impact the transmission mechanism of macroeconomic policy shocks on the real economy. Therefore, the major objective of this study is to understand how the presence of a large informal economy in Nigeria affects some macroeconomic variables in the advent of policy shocks. This thesis identifies three major gaps in the literature: First, there is a lack of extant literature concerning the estimation of the size of the informal economy in Nigeria over a long period of time (time series); second, to investigate the existence of business cycles in Nigeria; and third, prevailing literature on the informal economy in Nigeria, to the best of the researcher’s knowledge, fail to assess whether the informal economy provides a buffer in the advent of shocks to the economy. The Multiple Indicator Multiple Causes (MIMIC) model was used to estimate the size of the informal economy, while the Dynamic Stochastic General Equilibrium (DSGE) model was employed to investigate the buffer role of the informal economy and was estimated using the Bayesian approach. By estimating the MIMIC model, the results showed that the informal economy in Nigeria in terms of the gross domestic product has ranged from about 38 percent to 58 percent from 1991 to 2018. Also, changes in the size of the Nigerian informal economy are largely driven by deviations in the vulnerable employment rate and the urban population growth rate. Estimating the DSGE model, the study finds evidence that the informal economy plays a buffer role or an absorbing role in reducing the effectiveness of a monetary policy shock in contracting output in comparison to an economy with a relatively small informal economy. This thesis recommends that there is a need to implement market-friendly policies that would help to integrate the informal sector with the formal sector, thereby positively impacting the transmission mechanism of policy shocks on the real economy. These market-friendly policies are intended to encourage informal enterprises to register their businesses and pay taxes in the long run which will help boost the non-oil revenue of the government and provide a better basis for the derivation of economic policies

Carbon Emissions and the Business Cycle in Nigeria

Investigating the behaviour of carbon dioxide emissions to different macroeconomic variables has become critical in the recent years in environmental policy. In fact, a number of studies have continued to analyse different possible determinants of carbon emissions. However, very little attention has been given to relating real business cycles (RBCs) to carbon emissions in Nigeria. Thus, the main objectives of the study are; first, to document some stylised facts between the cyclical components of carbon emissions and gross domestic product (GDP) including also the relationship with two major components of GDP that have been credited to be a major sources of emissions (agricultural sector and the industrial sector) through the use of the Hodrick-Prescott filter. Secondly, to investigate the response of emissions to real shocks using the structural vector autoregressive approach. The study is able to find out that emissions are countercyclical to output, however, a pro-cyclical relationship is established with the agricultural and industrial sector. RBC shocks are seen to have a positive effect on carbon emissions in Nigeria. The study, therefore, recommends the implementation of environmental policies targeted towards the agricultural and industrial sector given the pro-cyclical relationship obtained from the analysis

Challenges of accountability and development in Nigeria

Purpose – The purpose of this paper is to examine the challenges of accountability and development in Nigeria. In the literature, corruption is seen as an indicator of a lack of political accountability in most countries of the world, especially in less developed countries such as Nigeria. The Nigerian Government has taken several actions to address the problems of bad governance and corruption that have impeded economic development, but unfortunately these measures have not yielded the desired results. Design/methodology/approach – Thus, this study examined accountability and developmental issues in Nigeria using secondary data and then made use of the auto-regressive distributed lag econometric technique to analyze the data. Findings – The results from the study found that a rise in total government expenditure poses a danger of reducing Nigeria’s economic development in the long run and that control of corruption and political (the institutional variables) has a direct and significant effect on Nigeria’s economic development. Originality/value – Therefore, upon these findings, this paper recommended that for Nigeria to experience development, corruption should be eliminated, and the Nigerian Government should spend on viable projects and economic activities that will be beneficial to the populace and the society at large and hence bring about economic development. Accountability is the hallmark of a prudent government that ensures efficient management of resources and transparency in the utilization of funds by the government. The absence of accountability mechanism allows corruption to thrive, which hinders the developmental process