IDEAS home Printed from https://ideas.repec.org/a/khe/scajes/v5y2019i2p159-165.html
   My bibliography  Save this article

Dynamic Analysis of the Effect of Fiscal Deficit on Inflation in Nigeria

Author

Listed:
  • Ibrahim Abdulhamid Danlami
  • Mohamad Helmi Bin Hidthiir
  • Sallahuddin Hassan

Abstract

The study is aimed at investigating the short-run and long-run dynamic effects of fiscal deficit on inflation in Nigeria. Autoregressive Distributed Lag Model (ARDL) was applied to time series data from 1970–2016 (of Nigeria). The result, of the estimation, reveals that fiscal deficit is inflationary during the short-run as well as the long-run of the period of study. Findings of the research are limited to Nigeria whose data were used, based on ARDL as the econometrics techniques applied, for a period 1970–2016. The fiscal spending of Nigerian government is one of the factors contributing to inflationary pressure in the country as seen in the findings of the research. The paper was able to prove empirically, the existence of the positive effect of fiscal deficit on inflation in Nigeria, using Nigerian data and also suggest for decision makers in the country to be cautious in terms of the way, the Nigerian government is financing its expenditure through borrowing and fiscal spending.

Suggested Citation

  • Ibrahim Abdulhamid Danlami & Mohamad Helmi Bin Hidthiir & Sallahuddin Hassan, 2019. "Dynamic Analysis of the Effect of Fiscal Deficit on Inflation in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(2), pages 159-165, June.
    • Handle: RePEc:khe:scajes:v:5:y:2019:i:2:p:159-165
    as

    Download full text from publisher

    File URL: http://www.ajes.ro/wp-content/uploads/AJES_article_1_259.pdf
    Download Restriction: no
    File URL: http://www.ajes.ro/wp-content/uploads/AJES_article_1_259.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:ilo:ilowps:464250 is not listed on IDEAS
    2. Alexander Chudik & Kamiar Mohaddes & M. Hashem Pesaran & Mehdi Raissi, 2013. "Debt, inflation and growth robust estimation of long-run effects in dynamic panel data models," Globalization Institute Working Papers 162, Federal Reserve Bank of Dallas.
    3. Anwar, Sarah. & Islam, Iyanatul,, 2011. "Should developing countries target low, single digit inflation to promote growth and employment," ILO Working Papers 994642503402676, International Labour Organization.
    4. W. Adrián Risso & Edgar J. Sánchez Carrera, 2009. "Inflation and Mexican economic growth: long‐run relation and threshold effects," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 1(3), pages 246-263, July.
    5. Olusanya E. Olubusoye & Rasheed Oyaromade, 2008. "Modelling the Inflation Process in Nigeria," Working Papers 182, African Economic Research Consortium, Research Department.
    6. Odusanya, Ibrahim Abidemi & Atanda, Akinwande AbdulMaliq, 2010. "Analysis of inflation and its determinants in Nigeria," MPRA Paper 35837, University Library of Munich, Germany.
    7. Andrew Phiri, 2012. "Threshold effects and inflation persistence in South Africa," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 4(3), pages 247-269, July.
    8. Tahira Ishaq & Hassan M. Mohsin, 2015. "Deficits and inflation; Are monetary and financial institutions worthy to consider or not?," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 15(3), pages 180-191, September.
    9. Jalil, Abdul & Tariq, Rabbia & Bibi, Nazia, 2014. "Fiscal deficit and inflation: New evidences from Pakistan using a bounds testing approach," Economic Modelling, Elsevier, vol. 37(C), pages 120-126.
    10. Abiola Adeola Kumapayi & Joseph Ufuoma Nana & Bright Onoriode Ohwofasa, 2012. "Impact of Inflation on Monetary Policy and Economic Development in Nigerian, 1980-2010. Evidence from Empirical Data," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 2(2), pages 28-39, June.
    11. Aliyu, Shehu Usman Rano & Englama, Abwaku, 2009. "Is Nigeria Ready for Inflation Targeting?," MPRA Paper 14870, University Library of Munich, Germany, revised 26 Apr 2009.
    12. George Adu & George Marbuah, 2011. "Determinants Of Inflation In Ghana: An Empirical Investigation," South African Journal of Economics, Economic Society of South Africa, vol. 79(3), pages 251-269, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ismail O. Fasanya & Ayinke Fajobi & Abiodun Adetokunbo, 2021. "Are Fiscal Deficits Inflationary In Nigeria? New Evidence From Bounds Testing To Cointegration With Structural Breaks," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 66(228), pages 123-148, January –.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ibrahim Abdulhamid Danlami & Mohamad Helmi Bin Hidthiir & Sallahuddin Hassan, 2018. "Inflation in Sierra Leone: An Empirical Analysis of the Impact of Interest Rate on Price Level Changes," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 4(4), pages 42-49, December.
    2. Ibrahim Abdulhamid Danlami, 2019. "Inflation Persistence in the West African Commonwealth Countries," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(3), pages 80-89, September.
    3. Ibrahim Abdulhamid Danlami, 2020. "Revisiting the West African Commonwealth Countries’ Exchange Rate Pass-Through to Inflation," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(1), pages 70-77, March.
    4. Ibrahim Abdulhamid Danlami & Sallahuddin Hassan & Mohamad Helmi Bin Hidthiir, 2020. "Assessing the Asymmetry of the Exchange Rate Pass-Through to Inflation in West African Commonwealth Countries," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(1), pages 93-109, March.
    5. Jeeban AMGAIN & Nanda Kumar DHAKAL, 2017. "Public revenue, fiscal deficit and economic growth: Evidence from Asian countries," Journal of Economics and Political Economy, KSP Journals, vol. 4(4), pages 329-342, December.
    6. Clement Olalekan Olaniyi, 2020. "Application of Bootstrap Simulation and Asymmetric Causal Approach to Fiscal Deficit-Inflation Nexus," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(2), pages 123-140, May.
    7. Idoko Ahmed Itodo & Seyi Saint Akadiri & Rotimi Mathew Ekundayo, 2017. "Monetary Policy and Price Stability in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 3(2), pages 68-75, June.
    8. Séverine MENGUY, 2019. "Does public indebtedness constrain or can it favor economic growth? A simple analytical modeling," Bulletin of Applied Economics, Risk Market Journals, vol. 6(2), pages 1-29.
    9. Gangopadhyay, Partha & Jain, Siddharth & Bakry, Walid, 2022. "In search of a rational foundation for the massive IT boom in the Australian banking industry: Can the IT boom really drive relationship banking?," International Review of Financial Analysis, Elsevier, vol. 82(C).
    10. Muhammad Tahir & Norulazidah Omar Ali & Imran Naseem & Umar Burki, 2023. "Trade Openness and Inflation Rate in China: Empirical Evidence from Time Series Data," Economies, MDPI, vol. 11(10), pages 1-10, September.
    11. Sharma, Rajesh & Shahbaz, Muhammad & Sinha, Avik & Vo, Xuan Vinh, 2021. "Examining the temporal impact of stock market development on carbon intensity: Evidence from South Asian countries," MPRA Paper 108925, University Library of Munich, Germany, revised 2021.
    12. Ruge-Leiva, Diego-Ivan, 2015. "The Online Supplement to “International R&D Spillovers and other Unobserved Common Spillovers and Shocks”," MPRA Paper 62205, University Library of Munich, Germany.
    13. Michal Andrle & Shafik Hebous & Alvar Kangur & Mehdi Raissi, 2021. "Italy: toward a growth-friendly fiscal reform," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 385-420, April.
    14. Andrew Phiri, 2017. "Nonlinear adjustment effects in the purchasing power parity," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 60(2), pages 14-38.
    15. Perekunah. B. Eregha, 2022. "Asymmetric response of cpi inflation to exchange rates in oil-dependent developing economy: the case of Nigeria," Economic Change and Restructuring, Springer, vol. 55(2), pages 1091-1108, May.
    16. Kahn, Matthew E. & Mohaddes, Kamiar & Ng, Ryan N.C. & Pesaran, M. Hashem & Raissi, Mehdi & Yang, Jui-Chung, 2021. "Long-term macroeconomic effects of climate change: A cross-country analysis," Energy Economics, Elsevier, vol. 104(C).
    17. Chakraborty, Saptorshee Kanto & Mazzanti, Massimiliano, 2021. "Renewable electricity and economic growth relationship in the long run: Panel data econometric evidence from the OECD," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 330-341.
    18. Bonizzi, Bruno, 2017. "Institutional investors’ allocation to emerging markets: A panel approach to asset demand," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 47(C), pages 47-64.
    19. Kamiar Mohaddes & Ryan N C Ng & M Hashem Pesaran & Mehdi Raissi & Jui-Chung Yang, 2023. "Climate change and economic activity: evidence from US states," Oxford Open Economics, Oxford University Press, vol. 2, pages 28-46.
    20. Ahmet Benlialper & Hasan Cömert, 2016. "Implicit asymmetric exchange rate peg under inflation targeting regimes: the case of Turkey," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(6), pages 1553-1580.

    More about this item

    Keywords

    ARDL; Commonwealth; Fiscal Deficit; Inflation; Nigeria;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:khe:scajes:v:5:y:2019:i:2:p:159-165. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Adi Sava (email available below). General contact details of provider: https://edirc.repec.org/data/ffucdro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.