Inflation and Financial Sector Performance: The Case Of Nigeria

The paper examines the long run and short run relationships between inflation and financial sector development in Nigeria over the period between 1970 and 2012. Three variables, namely; broad definition of money as ratio of GDP, quasi money as share of GDP and credit to private sector as share of GDP, were used to proxy financial sector development. Our findings suggest that inflation presented deleterious effects on financial development over the study period. The main implication of the results is that poor macroeconomic performance has deleterious effects to financial development - a variable that is important for affecting economic growth and income inequality. More so, we observed a negative effect of the measures of financial development on growth, suggesting that impact of inflation on the economic growth passes through financial sector. Therefore, low and stable prices, is a necessary first step to achieving a deeper and more active financial sector that will enhance growth as predicted by Schumpeter.

Public Spending and Economic Welfare in ECOWAS Countries: Does Level of Development Matter?

Conflicting views on the sign of the relationship between government size and economic development have resulted into the testing of non-monotonic relationship in the literature. Therefore, the total effect of growing public spending on economic development is ambiguous. This study investigated how government size affect economic development and determine the optimal government size that promotes economic development in ECOWAS countries. The study employed secondary data covering the period 1986 to 2018. Data on Gross Domestic Product per capita, government size, population growth rate, inflation rate, gross fixed capital formation and financial development variables were sourced from World Development indicator database. The study constructed social welfare function as development indicator. Data were analysed using Least Absolute Deviation (LAD) regression and quantile regression (QR). The findings showed that quantile regression estimates are negative and significant (p < 0.05) in low quantiles, thus suggesting that deleterious effect of government size is more pronounced among countries with low level of economic development

Growth effect of government expenditures in West African countries: A nonlinear framework

The study investigated the impact of government size on economic growth and determined the optimal government size that will promote growth in ECOWAS Countries. This was with a view to determining the relationship between government size and economic growth in ECOWAS countries. The study employed annual secondary data. Data covering the period 1980 to 2015 on total government spending, gross domestic product, imports and exports of goods and services, domestic investment, inflation rate, total population and institutional quality were collected from World Development Indicators. Data were analysed using Panel Fixed Effect analytical technique. The study found that government size had positive and significant (t = 3.59, p < 0.05) impact on economic growth when government size is below the optimal size whereas the impact was negative and significant (t = -3.08, p < 0.05) when government size is above the optimal size. Furthermore, the optimal government size is 25.31% of total GDP on the average for ECOWAS countries and this level has not been reached by any of the ECOWAS member countries. The study concluded that the relationship between government size and economic growth depends on optimal government size in ECOWAS countries

Growth effect of government expenditures in West African countries: A nonlinear framework

The study investigated the impact of government size on economic growth and determined the optimal government size that will promote growth in ECOWAS Countries. This was with a view to determining the relationship between government size and economic growth in ECOWAS countries. The study employed annual secondary data. Data covering the period 1980 to 2015 on total government spending, gross domestic product, imports and exports of goods and services, domestic investment, inflation rate, total population and institutional quality were collected from World Development Indicators. Data were analysed using Panel Fixed Effect analytical technique. The study found that government size had positive and significant (t = 3.59, p < 0.05) impact on economic growth when government size is below the optimal size whereas the impact was negative and significant (t = -3.08, p < 0.05) when government size is above the optimal size. Furthermore, the optimal government size is 25.31% of total GDP on the average for ECOWAS countries and this level has not been reached by any of the ECOWAS member countries. The study concluded that the relationship between government size and economic growth depends on optimal government size in ECOWAS countries

Public Spending and Economic Welfare in ECOWAS Countries: Does Level of Development Matter?

Conflicting views on the sign of the relationship between government size and economic development have resulted into the testing of non-monotonic relationship in the literature. Therefore, the total effect of growing public spending on economic development is ambiguous. This study investigated how government size affect economic development and determine the optimal government size that promotes economic development in ECOWAS countries. The study employed secondary data covering the period 1986 to 2018. Data on Gross Domestic Product per capita, government size, population growth rate, inflation rate, gross fixed capital formation and financial development variables were sourced from World Development indicator database. The study constructed social welfare function as development indicator. Data were analysed using Least Absolute Deviation (LAD) regression and quantile regression (QR). The findings showed that quantile regression estimates are negative and significant (p < 0.05) in low quantiles, thus suggesting that deleterious effect of government size is more pronounced among countries with low level of economic development

Testing an Augmented Fisher Hypothesis for a Small Open Economy: The Case of Nigeria

This paper investigates the relationship between expected inflation and nominal interest rates in Nigeria and the extent to which the Fisher effect hypothesis holds, for the period 1970-2009. We made attempt to advance the field by testing the traditional closed-economy Fisher hypothesis and an augmented Fisher hypothesis by incorporating the foreign interest rate and nominal effective exchange rate variable in the context of a small open developing economy, such as, Nigeria. The stability of the functions was also tested by CUSUM and CUSUMSQ. Our findings tend to suggest: (i) that the nominal interest rates and expected inflation move together in the long run but not on one-to-one basis. This indicates that full Fisher hypothesis does not hold but there is a strong Fisher effect in the case of Nigeria over the period under study (ii) consistency with the international Fisher hypothesis, these domestic variables have a long run relationship with the international variables (iii) in the closed-economy context,the causality run strictly from expected inflation to nominal interest rates as suggested by the Fisher hypothesis and there is no “reverse causation.” But in the open economy context, the expected inflation and international variables contain the information that predict the nominal interest rate(iv) that only about 29 percent of the disequilibrium between long term and short term interest rate is corrected within the year. (v) finally, CUSUM test stability of the coefficients

Government Spending and National Income: A Time Series and Panel Analysis for Nigeria, Ghana and South Africa

This study examined the causal relationship between government spending and national income in panel of three African countries – Nigeria, Ghana and South Africa - during the period 1970 to 2012 using Johansen Fisher Panel Cointegration Test and then on a country-by-country basis using time series Johansen-Juselius cointegration techniques. The panel cointegration results indicate a long run relationship between government spending and national income in the whole panel. The Johansen-Juselius cointegration test suggests an existence of long run relationship between government spending and national income only for Ghana as predicted by Wagner, thus suggesting government spending is not an important factor in economic growth in the long run in Nigeria and South Africa. We found an evidence of bi-directional causality granger causality tests for the whole panel. Furthermore, the result from the causality test shows that there is a bi-directional causality that runs from national income to government expenditure and vice versa for Nigeria and South Africa. However, for Ghana, there was a uni-directional causality that runs from government expenditure to national income and there is no feed-back mechanism. We concluded that Government spending enhances National Income enormously and vice-versa in the short run for Nigeria and South Africa. Keywords: Government Expenditures, National Income, Panel Data Analysi

DOLS Cointegration Vector Estimation of the Effect of Inflation and Financial Deepening on Output Growth in Nigeria

This study aimed at empirically exploring the triangle of relationships – finance-inflation-growth – with the broader data sets (1970 - 2012) to see whether a direct effect of inflation on growth can be identified as well as an indirect effect through financial sector development. It also seeks to explore the relative strength of the variables in affecting economic growth using the variance decompositions (VDCs) and the impulse-response functions (IRFs) based on the structural vector autoregression (VAR) framework. We found that both Engel - Granger and Johansen cointegration test suggest that the variables are cointegrated. Based on the existence of cointegration relationship among the variables, we therefore estimate the long-run relationships using the Stock-Watson’s dynamic ordinary least squares (DOLS) model. The results of DOLS model give an indication that inflation effect on growth is independent of financial development while the financial development effect on growth is dependent of inflation. Furthermore, we also found no evidence of short run causality between RGDP and INF; and there is existence of short run interaction between RGDP and FD that is a bi-directional causality between the variables. Variance decompositions (VDCs) results revealed the variations in the economic growth in Nigeria respond more to shocks in trade openness and next government spending, however, the variations in the economic growth rely more on its own innovations. The policy implication of this finding is for policy makers to develop strategy that will holistic reforms in the financial system and enhance stock market development along side with banking financial institutions. Finally, since financial development effect on growth is dependent of inflation, policy that will ensure price stability will promote output further

A Time Series and Panel Analysis of Government Spending and National Income

This study examined the causal relationship between government spending and national income in panel of three African countries – Nigeria, Ghana and South Africa - during the period 1970 to 2012 using Johansen Fisher Panel Cointegration Test and then on a country-by-country basis using time series Johansen-Juselius cointegration techniques. The panel cointegration results indicate a long run relationship between government spending and national income in the whole panel. The Johansen-Juselius cointegration test suggests an existence of long run relationship between government spending and national income only for Ghana as predicted by Wagner, thus suggesting government spending is not an important factor in economic growth in the long run in Nigeria and South Africa. We found an evidence of bi-directional causality granger causality tests for the whole panel. Furthermore, the result from the causality test shows that there is a bi-directional causality that runs from national income to government expenditure and vice versa for Nigeria and South Africa. However, for Ghana, there was a uni-directional causality that runs from government expenditure to national income and there is no feed-back mechanism. We concluded that Government spending enhances National Income enormously and vice-versa in the short run for Nigeria and South Africa

Inflation and Financial Sector Performance: The Case Of Nigeria

The paper examines the long run and short run relationships between inflation and financial sector development in Nigeria over the period between 1970 and 2012. Three variables, namely; broad definition of money as ratio of GDP, quasi money as share of GDP and credit to private sector as share of GDP, were used to proxy financial sector development. Our findings suggest that inflation presented deleterious effects on financial development over the study period. The main implication of the results is that poor macroeconomic performance has deleterious effects to financial development - a variable that is important for affecting economic growth and income inequality. More so, we observed a negative effect of the measures of financial development on growth, suggesting that impact of inflation on the economic growth passes through financial sector. Therefore, low and stable prices, is a necessary first step to achieving a deeper and more active financial sector that will enhance growth as predicted by Schumpeter