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Economic Stabilisation and Performance in West Africa: The Role of Fiscal and Monetary Policy

Author

Listed:
  • Ekundayo P. Mesagan

    (Pan Atlantic University, Lekki, Lagos, Nigeria)

  • Ismaila A. Yusuf

    (University of Strathclyde, Glasgow, Scotland)

Abstract

The study examines the impact of fiscal and monetary policy on economic performance and stabilisation in Nigeria, Gambia, and Ghana between 1980 and 2017. In the study, the real gross domestic product and the exchange rate are used to proxy economic performance and economic stabilisation respectively while fiscal policy is captured with deficit finance and government expenditure. Also, the broad money supply and monetary policy rate are used as proxies of monetary policy. The study obtains country-specific results using the fully modified ordinary least squares technique and findings show that monetary policy has insignificant effect on economic performance in Nigeria and the Gambia, but has significant impact in Ghana while fiscal policy significantly enhances economic performance in Nigeria and Gambia, but is insignificant in Ghana. Result also confirms that monetary policy significantly drives economic stabilisation in Nigeria and the Gambia, but insignificantly in Ghana while fiscal policy has insignificant impact on economic stabilisation in Ghana and Gambia, but significant in Nigeria. Thus, we conclude that fiscal policy is relatively more important in stimulating economic performance in Nigeria and Gambia while monetary policy is relatively more important in determining economic performance in Ghana. For economic stabilisation, both fiscal and monetary policies are important in Nigeria, both are ineffective in Ghana, while monetary policy is more important in the Gambia. The study recommends further reductions in monetary policy rate to put less pressure on the exchange rate and stabilise the various economies.

Suggested Citation

  • Ekundayo P. Mesagan & Ismaila A. Yusuf, 2019. "Economic Stabilisation and Performance in West Africa: The Role of Fiscal and Monetary Policy," Working Papers of the African Governance and Development Institute. 19/097, African Governance and Development Institute..
  • Handle: RePEc:agd:wpaper:19/097
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal Policy; Monetary Policy; Deficit Finance; Economic Performance.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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