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Does Fiscal Deficit Granger Cause Impulsiveness in Inflation Rate in Nigeria?

Author

Listed:
  • Oseni Isiaq Olasunkanmi

    (Olabisi Onabanjo University)

  • Sanni Hauwa Yetunde

    (Bells University of Technology)

Abstract

This study examines the direction of causality between fiscal policy and inflation volatility in Nigeria for the periods 1981 to 2014. Studies have examined the relationship between fiscal policy and inflation volatility without taking cognizant of the direction of relationship that exist between the two variables, hence this study. The study employs quarterly time series data on fiscal deficit and consumer price index (measure of inflation rate) from 1981:1 to 2013:3 and obtains from the central bank of Nigeria statistical bulletin 2014 while the volatility data is generated through GARCH (1,1) method and analyze using the Pairwise Granger Causality Test. The results of the study showed that there is bi-directional causality between fiscal deficit (F-statistic=5.86 & 3.96;P

Suggested Citation

  • Oseni Isiaq Olasunkanmi & Sanni Hauwa Yetunde, 2016. "Does Fiscal Deficit Granger Cause Impulsiveness in Inflation Rate in Nigeria?," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(4), pages 208-216, October.
    • Handle: RePEc:dug:actaec:y:2016:i:4:p:208-216
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    File URL: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/3256/3454
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    References listed on IDEAS

    as
    1. Catao, Luis A.V. & Terrones, Marco E., 2005. "Fiscal deficits and inflation," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 529-554, April.
    2. Niskanen, William A., 1978. "Deficits, government spending, and inflation : What is the evidence?," Journal of Monetary Economics, Elsevier, vol. 4(3), pages 591-602, August.
    3. David Fielding, 2008. "Inflation Volatility and Economic Development: Evidence from Nigeria," Working Papers 0807, University of Otago, Department of Economics, revised Sep 2008.
    4. Landon, Stuart & Reid, Bradford G, 1990. "Government Deficits and Money Growth," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 382-389, August.
    5. Ahking, Francis W. & Miller, Stephen M., 1985. "The relationship between government deficits, money growthm and inflation," Journal of Macroeconomics, Elsevier, vol. 7(4), pages 447-467.
    6. Christopher Bowdler & Adeel Malik, 2005. "Openness and inflation volatility: cross-country evidence," CSAE Working Paper Series 2005-08, Centre for the Study of African Economies, University of Oxford.
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    Cited by:

    1. Olusola Joel Oyeleke, 2021. "On the Non-Linear Relationship between Fiscal Deficit and Inflation: The Nigeria Experience," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 27(2), pages 105-117, May.
    2. Ajide, Folorunsho M., 2021. "Fiscal Policy and Crime Rate in Nigeria," African Journal of Economic Review, African Journal of Economic Review, vol. 9(4), September.
    3. Ebenezer A. OLUBIYI & Michael A. BOLARINWA, 2018. "Fiscal deficit and inflation rate in selected African Regional Blocs: A comparative analysis," Turkish Economic Review, KSP Journals, vol. 5(1), pages 89-101, March.
    4. Mutiu Gbade Rasaki, 2017. "An Estimated New Keynesian Phillips Curve for Nigeria," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(2), pages 203-211, April.

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