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Estimation of Fiscal Multipliers and Its Macroeconomic Impact: The Case of Nigeria

Author

Listed:
  • D. J. Penzin

    (Central Bank of Nigeria)

  • E. T. Adamgbe

    (Central Bank of Nigeria)

Abstract

Fiscal multipliers are important tools for macroeconomic projections and policy design. However, very little is known about the size in developing countries, given the complexity of their estimation. The unavailability of reliable high frequency data and structural characteristics of these countries also make the estimation of fiscal multipliers difficult, in such countries. This paper estimated fiscal multipliers associated with government spending and tax-related revenue for Nigeria using quarterly data, spanning 1985: Q1 to 2015 Q4. The structural vector autoregression (SVAR) methodology suggested by Blanchard and Perotti (2002) was utilised in the model. The SVAR framework applied followed the approach by Favero and Giavazzi (2007) to augment for a feedback mechanism, arising from the level of debt, especially given Nigeria’s rising debt level. The results showed that government spending multiplier for Nigeria was high, at 0.47 on impact and at 0.35 within a quarter. Similarly, the tax revenue multiplier was equally high at 0.67 on impact and 0.33 within a quarter. This result suggested that reform programmes, aimed at rejuvenating the economy should consider the impact of these multipliers in assessing expenditure requirements and tax plans that would achieve government objectives over the programme period.

Suggested Citation

  • D. J. Penzin & E. T. Adamgbe, 2019. "Estimation of Fiscal Multipliers and Its Macroeconomic Impact: The Case of Nigeria," Economic and Financial Review, Central Bank of Nigeria, vol. 57(2), June.
  • Handle: RePEc:ava:cbnefr:v:57:y:2019:i:2:a:3:p:
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    References listed on IDEAS

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