FISCAL RESPONSIBILITY LAW, FISCAL DISCIPLINE AND MACROECONOMIC STABILITY: Lessons from Brazil and Nigeria

Ezeabasili, Vincent N.

doi:10.4172/2162-6359.1000141

Cited by 3 publications

(4 citation statements)

References 2 publications

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“…There are few studies that focused on Nigeria, Ezeabasili et al (2012) provided an empirical investigation into the fiscal deficit–inflation nexus during the period of persistent inflationary trends from 1960 to 2006. This was done via co-integration technique and structural analysis.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Also, some empirical studies have established a two-way causality between the two variables (Chimobi & Igwe, 2010; Onwiduokit, 1999; Oseni & Sanni, 2016). Still others show evidence of weak or no causal link ( Ahking & Miller, 1985; Akgay et al, 2001; Barro, 1989; Ezeabasili et al, 2012; Faini, 1991; Landon & Reid, 1990; McMillin & Beard, 1982; Niskanen, 1978). Aside from the inconclusiveness of previous studies, the issues of persistent budget deficits and double-digit inflation rates are fundamental causes of macroeconomic instability (Olomola & Olagunju, 2004; Olubiyi & Bolarinwa, 2018) in Nigeria’s economy and it has continued to be a subject of debate among policy makers and scholars alike.…”

Section: Introductionmentioning

confidence: 99%

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Application of Bootstrap Simulation and Asymmetric Causal Approach to Fiscal Deficit-Inflation Nexus

Olaniyi

2020

Global Journal of Emerging Market Economies

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This paper investigates the symmetric and asymmetric relationship between fiscal deficits and inflation in Nigeria within the context of bootstrap simulations with leverage adjustments using the quarterly frequency data from 1981Q1 to 2016Q4. The findings reveal that there is neither symmetric nor asymmetric causality between fiscal deficits and inflation in Nigeria. This implies that the fiscal deficits in Nigeria are not inflationary; and also, that persistent double-digit inflation rates are not the causal agents spurring perennial increase in fiscal deficits in Nigeria. This study, therefore, concludes that fiscal deficits could be used to stimulate output level in Nigeria without fueling inflationary spiral in the economy. JEL Classification: C32, E17

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Application of Bootstrap Simulation and Asymmetric Causal Approach to Fiscal Deficit-Inflation Nexus

Olaniyi

2020

Global Journal of Emerging Market Economies

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“…This resolution follows the observation of past evolution from 1972 to 2012. Analyzing the deficit-inflation relation in a vector autoregressive framework, based on annual series studies from 1970 to 2006, Ezeabasili, Mojekwu and Herbert (2012) provided empirical backing suggesting that fiscal deficit does not cause inflation in Nigeria. They found strong connection tying rising inflation in the country to previous fiscal year's borrowing.…”

Section: Empirical Review and Hypothesis Developmentmentioning

confidence: 99%

Fiscal Dominance and Inflationary Pressure: Empirical Evidence from Nigeria

Denwi,

Medee,

Ikue

et al. 2023

dbebj.com

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In light of Nigeria’s high inflationary environment characterized by rising commodity prices and a growing public debt, this study aims to examine fiscal dominance hypothesis in Nigeria. Specifically, we investigate whether the borrowing activities of the fiscal authorities impede the Central Bank of Nigeria (CBN) in achieving price stability. To conduct this analysis, we utilize annual data on the budget deficit as a percentage of gross domestic product and the change in monetary base, covering the period from 1981 to 2022. The data for these variables were sourced from the Central Bank of Nigeria (CBN) official website and Statistical Bulletin. Our empirical analysis employs econometric methods, including unit root tests and the Toda and Yamamoto (T-Y) Granger non-causality approach. The results from our Granger causality test reveal the presence of bidirectional causality between the budget deficit and the growth of the monetary base, thereby violating the conditions for fiscal dominance. These findings suggest that the pursuit of price stability objectives by the Central Bank of Nigeria (CBN) is not constrained by the government's borrowing activities. Consequently, conventional policy tools can be effectively utilized to address inflationary pressures without compromising the government's ability to service its debt obligations. Overall, our study provides evidence that fiscal dominance does not appear to be a significant concern in Nigeria. This implies that policymakers can focus on implementing appropriate monetary policy measures to combat inflation, while ensuring that government borrowing activities do not hinder the achievement of price stability. Keywords: Fiscal Dominance, Budget Deficits, Monetary Base, Inflation

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“…Fiscal deficits have continued to be a problem in both developing and developed countries worldwide (Ezeabasili, Mojekwu, & Herbert, 2012).The worldwide rise in fiscal deficits among developing countries has been driven by the requirement to preserve socioeconomic stability (health, education and infrastructure), foster economic growth and provide employment through the fiscal budget. In sub-Saharan African countries, political unrest, mismanagement of resources and limited tax bases are a few causes that have contributed to the surge (Heitzig, Ordu, & Senbet, 2021;Sani, Said, Ismail, & Mazlan, 2019).…”

Section: Introductionmentioning

confidence: 99%

Domestic verses foreign borrowing: Does the mode of fiscal deficit financing matter for inflation in Sub-Saharan African countries?

Sumba,

Ondiba,

Mugambi

2023

IJAEFA

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The aim of this study was to analyze the relationship between fiscal deficit financing and inflation in sub-Saharan African countries and determine whether the mode of fiscal deficit financing selected in the economy matters for inflation. The panel data sourced from 45 sub-Saharan African countries from 2005 to 2020 was used for analysis with domestic and foreign borrowing as the main independent variables and the consumer price index as the dependent variable. The study used two-step GMM econometric analysis as the main econometric model with a scaling quantity analysis model to test for the relative effect of the deficit financing tools on inflation. The results show that deficit financing through foreign and domestic borrowing positively influences inflation among sub-Saharan African countries and the severity of the effect on inflation differs between the two modes of deficit financing. This is shown by the domestic borrowing's scaling quantity analysis value of 0.12 against 0.08 for the foreign borrowing. The practical implication of this study is that fiscal deficit financing is inflationary and domestic borrowing causes more inflation than foreign borrowing. Sub-Saharan African governments must therefore make efforts to reduce the fiscal deficit because of the increasing impact of the budget deficit on inflation whenever it is funded. However, foreign borrowing should be preferred to domestic borrowing because it achieves the macroeconomic goal of financing the budget deficit with a lower inflationary effect in cases where deficit financing is unavoidable.

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FISCAL RESPONSIBILITY LAW, FISCAL DISCIPLINE AND MACROECONOMIC STABILITY: Lessons from Brazil and Nigeria

Cited by 3 publications

References 2 publications

Application of Bootstrap Simulation and Asymmetric Causal Approach to Fiscal Deficit-Inflation Nexus

Application of Bootstrap Simulation and Asymmetric Causal Approach to Fiscal Deficit-Inflation Nexus

Fiscal Dominance and Inflationary Pressure: Empirical Evidence from Nigeria

Domestic verses foreign borrowing: Does the mode of fiscal deficit financing matter for inflation in Sub-Saharan African countries?

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