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Public Debt and Inflation Nexus in Nigeria: An ARDL Bounds Test Approach

Author

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  • Akingbade U. Aimola
  • Nicholas M. Odhiambo

Abstract

Inflationary tendencies of public debt have been the cause of an unsettling debate among policymakers in Nigeria. Using the autoregressive distributed lag (ARDL) framework, this study attempts to investigate the impact of total public debt on inflation in Nigeria for the period 1983–2018. The cointegrating regression results reveal evidence of a stable long-run relationship among inflation, total public debt, money supply, interest rate, economic growth, trade openness, and private investment in the presence of structural breaks. Empirical results show that the impact of public debt on inflation is statistically insignificant, irrespective of whether the regression was in the short or the long run. Hence, the study concludes that inflation in Nigeria could be driven by other factors other than public debt.

Suggested Citation

  • Akingbade U. Aimola & Nicholas M. Odhiambo, 2021. "Public Debt and Inflation Nexus in Nigeria: An ARDL Bounds Test Approach," Working Papers 2109, African Economic and Social Research Institute (AESRI).
    • Handle: RePEc:afa:wpaper:2109
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    File URL: https://aesri.org/RePEc/afa/afa-wpaper/AESRIWP09.pdf
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    More about this item

    Keywords

    public debt; inflation; ARDL; Nigeria.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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