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The Saint-Louis Equation Rebirth: Re-Accessing Fiscal and Monetary Policies Mix in Nigeria

Author

Listed:
  • Timilehin John Olasehinde

    (Ekiti State University)

  • Afolabi Mutiu Adeniyi

    (Federal Polytechnic Offa)

  • Adeyemi Kamar Kayode

    (Federal Polytechnic Offa)

  • Adigun Saidat Motunrayo

    (Federal Polytechnic Offa)

  • Federal Polytechnic Offa

    (Adekunle Ajasin University Akungba)

  • Babatunde Kowe

    (Ekiti State University)

Abstract

This study restates the Saint-Louis equation to reinvestigates the relative effectiveness of fiscal and monetary policies on the Nigerian economy. This study made use of annual data from 1981 to 2015. The unit root test revealed that the variables employed contained a unit root. An Autoregressive Distributed Lag (ARDL) technique is used in this study, and cointegration test among the variables was passed using the ARDL bound test technique. The ARDL parameter estimates are used to compute impulse response function in order to shed light on fiscal-monetary impacts’ puzzle in the existing literature. The impulse responses show that, GDP responses to fiscal and monetary policy shocks are mixed in signs. Ultimately, the impulse responses allow us to find out that the very long run responses of GDP to fiscal and monetary policies shocks are negative and positive. Conclusively from our findings, monetary policy is effective than fiscal policy in Nigeria. Based on our findings, we suggest that the government and the policymakers should try to simultaneously make fiscal and monetary policies formulation in such a way that their temporal and cumulative effects on the economy for growth and sustainability motive would be positive.

Suggested Citation

  • Timilehin John Olasehinde & Afolabi Mutiu Adeniyi & Adeyemi Kamar Kayode & Adigun Saidat Motunrayo & Federal Polytechnic Offa & Babatunde Kowe, 2018. "The Saint-Louis Equation Rebirth: Re-Accessing Fiscal and Monetary Policies Mix in Nigeria," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 14(7), pages 723-736, DECEMBER.
    • Handle: RePEc:dug:actaec:y:2018:i:7:p:723-736
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