Assessing The Effect Of Monetary And Fiscal Policies On Macroeconomic Fundamentals In Nigeria: Impact Of The Recent Global Financial Crisis

• Activity Number: 417
• Type: Contributed
• Date/Time: Tuesday, August 2, 2011 : 2:00 PM to 3:50 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Chioma Nwosu*+ and Phebian Omanukwue
• Companies: Central Bank of Nigeria and Central Bank of Nigeria
• Keywords: Monetary Policy ; Fiscal Policy ; Output ; Prices ; Financial Crisis ; Nigeria

Abstract

The paper analyses the effects of fiscal and monetary policies shocks on output and prices in Nigeria during the outturn of the global financial crisis. The analysis further captures the contribution of these shocks to these two variables. In carrying out the analysis, a Vector Auto-Regressive model (VAR) was developed; first, by analyzing the monetary policy shocks; second, the fiscal policy shocks is then introduced to the model to jointly analyze the effects of the two policies on output and prices. The results showed that both fiscal and monetary policies remain effective in explaining output growth, although at varying degrees. The monetary policy variable explained more of the variations in real output growth and prices than the fiscal policy variable during the financial crisis. Thus, suggesting that monetary policy had more significant impact on real output growth and price in Nigeria during the crisis.