Appropriate macroeconomic policies for Nigeria's economic growth, 1981-2010: an econometric analysis

Abstract

Policymakers in Nigeria are aware of the importance of sustained economic growth as a macroeconomic policy. The paper is aimed at examining the effects of stabilization policy instruments on economic growth. We used modern econometric techniques and the empirical results based on annual data spanning the period 1981-2010. Econometric results show that fiscal policy instrument had a negative impact on GDP growth. CEF took a negative sign in all the three models. All monetary policy variables except PRM had a positive impact on GDP growth. Nominal exchange rate growth had a positive impact on growth except in model 1. All three models had a good fit. This study recommends that expansionary fiscal policy measures be pursued with caution not to worsen inflationary trend in the economy. A less volatile interest rate regime would increase reliability and confidence of investors in the economy. It is also relevant for monetary authorities and other players in the economy to encourage economy wide international trade competitiveness so as to maintain positive growth in exchange rate of the naira which will contribute to bringing about the desired GDP growth in the Nigerian economy and other developing economies.