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Optimal Fiscal and Monetary Policy Under Uncertainty in Nigeria: A Markov-Switching Dynamic Approach

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  • Rufus Adebayo AJISAFE

    (Obafemi Awolowo University,Ile-Ife,Osun State,Nigeria)

  • Kazeem FASOYE

    (Department of Economics,Obafemi Awolowo University,Ile-Ife,Osun State, Nigeria)

  • Musbau Olaniyan FATAI

    (Obafemi Awolowo University,Ile-Ife,Osun State, Nigeria)

  • Folorunsho M. AJIDE

    (University of Ilorin,Ilorin,Nigeria)

Abstract

The effectiveness of the conduct of fiscal and monetary policy under uncertainty in Nigeria between 1980 and 2020 was examined using a Markov-switching dynamic regression model to b estimate the uncertainty as portrayed by monetarists/ neo-Keynesians. The results reveal an ineffective conduct of fiscal and monetary policy under uncertainty in Nigeria as it is shown that the uncertainty about the impact of fiscal and monetary policy in the future surpasses the existing uncertainty as indicated by the higher probability values. b The study recommends a dominance of monetary policy rather than fiscal policy if the policy thrust of the government is to reduce policy uncertainty in the economy both at current and future periods.

Suggested Citation

  • Rufus Adebayo AJISAFE & Kazeem FASOYE & Musbau Olaniyan FATAI & Folorunsho M. AJIDE, 2022. "Optimal Fiscal and Monetary Policy Under Uncertainty in Nigeria: A Markov-Switching Dynamic Approach," Romanian Journal of Economics, Institute of National Economy, vol. 55(2(64)), pages 113-128, December.
    • Handle: RePEc:ine:journl:v:55:y:2022:i:64:p:113-128
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    References listed on IDEAS

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    More about this item

    Keywords

    monetary policy; fiscal policy; markov switching; regime; uncertainty;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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