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Effect of Monetary-Fiscal Policies Interaction on Price and Output Growth in Nigeria
No full textThis paper investigates the effectiveness of monetary-fiscal policies interaction on price and output growth in Nigeria. The dynamic correlations of variables have been captured by the analyses of impulse response and variance decomposition. From innovation analyses, the results suggest that the policy variables money supply and government revenue have more positive impact on price and economic growth in Nigeria specifically in the long run, thus some time with lag. Although monetary and fiscal policy variables have a dominant effect on economic activity, it is clear from this study that economic activity is dominated by its own dynamics in most of the periods. The estimates presented in this paper suggest that both monetary and fiscal policy exert greater impact on real GDP and inflation in Nigeria. Overall, it is evident that the impact of policy is sorely depending on the policy variable selected, although some policy variables are considered to be more beneficial to the social and economic development
Nigerian Stock Index: A Search for Optimal GARCH Model using High Frequency Data
No full textThis paper attempts to fit the best Generalized Autoregressive Conditional Heteroscedastic (GARCH) model for All Share Index (ASI) of Nigerian Stock Exchange (NSE) returns. A search is made on various GARCH variants specified on the assumptions of stationarity and asymmetry. Fractionally integrated types are also considered to capture the possibility of return series having property of long range dependency. The parameter estimations are carried out on the assumptions of normality and non-normality of GARCH innovations, with models and forecasts evaluated using information criteria and loss functions respectively. Under normality assumption, Hyperbolic GARCH (HYGARCH(1,d,1)) model is selected and Integrated GARCH (IGARCH(1,1)) and Fractionally Integrated Exponential GARCH (FIEGARCH(1,d,1)) models selected under the Student t and Generalized Error Distributions. Of these three models, HYGARCH(1,d,1) is the overall best model
Government Size and Economic Growth in Nigeria: A Test of Wagner\u27s Hypothesis
No full textThis paper attempts an empirical validation of Wagner\u27s law in Nigeria using quarterly data for the period 1982 to 2012. The hypothesis that real income does not Granger-cause government expenditure was rejected. Adopting the Fully Modified Ordinary Least Square (FMOLS) regression techniques, the study found support for the Wagner\u27s hypothesis in Nigeria. The analysis provided empirical evidence to support the existence of a long-run equilibrium relationship between economic activity and government expenditure in Nigeria. Overall, the results corroborated the Goffman\u27s version of the Wagner\u27s law in Nigeria. Thus, government needs to create fiscal space to enable deployment of more resources in growth-enhancing activities, while at the same time putting in place policies aimed at raising revenues concomitantly
Capital Flows, Capital Control and Exchange Rate Regimes
No full textThe objective of this presentation is to examine the importance of capital controls on the flow of foreign capital under the current circumstance for the benefit of the Nigerian economy. Part II of the paper will look into some critical issues in the global capital flows by identifying the principal agents; structure and trends of the flows; effects; and policy options in managing the flows. In Part III, an attempt is made to review the historical developments of global governance of capital controls since the pre-World War I, while Part IV examines the policy challenges in capital control management strategies. Part V examines the on-going ECOWAS financial integration among its Member States, coming at a time of increasing voice for a return to the Bretton Woods\u27s ideology. Part VI concludes the paper with charting a framework for increasing the resilience of the Nigerian capital flow system
Policy Space for Capital Controls and Macroeconomic Stability: Lessons from Emerging Economies
No full textThe paper discusses the concept of policy space and the factors influencing policy space in developing economies. It also discusses changing attitudes towards capital controls by researchers and agencies with emphasis on the International Monetary Fund (IMF)
External reserves management and utilization: Nigeria experience
No full textThe objective of this paper is to appraise developments in external reserves management and utilization in Nigeria, with o view to identifying major challenges and proffering solutions. The paper is divided into six sections. Following this introductory section, section two reviews some of the major conceptual and analytical issues on external reserves management and utilization, while section three discusses Nigeria\u27s external reserves management process. Section four appraises developments in external reserves management and utilization, as well as examines the impact of external reserves on the four sectors of Nigerian economy. Section five highlights major challenges in external reserves management and utilization in Nigeria, while section six concludes the paper and provides some policy recommendations
Transition to Full-Fledged Inflation Targeting: a proposed programme for implementation by the Central Bank of Nigeria
No full textThis paper attempts to provide an input into addressing these issues, especially as regards resolving the technical, administrative and practical problems for a transition to inflation targeting as a framework for monetary policy in Nigeria. Specifically, the main purpose of this paper is to outline proposals that would permit the CBN transit successfully to full-fledged inflation targeting (FFIT) for its monetary policy operations. Following the introduction (Section 1), the paper is organized as follows: Section 2 examines the conceptual framework, focusing on the essential elements and modalities of different monetary policy frameworks. Section 3 contains an overview of the experiences of the present IT economies, including the origins, design and operations of their frameworks, and a general assessment of their performance. Section 4 reviews the evolution of monetary policy frameworks in Nigeria, concluding with an assessment of the prospects for a shift to IT. Section 5 contains a detailed analysis of the proposals for a transition to an IT framework in Nigeria with a specific focus on the technical aspects, roles of various institutions, as well as how to resolve critical policy decisions and address identified risks. Section 6 contains the summary, conclusion and policy recommendations which put forward an outline of identified activities for transition to a FFIT framework in Nigeri
Exchange–Rates Volatility in Nigeria: Application of GARCH Models with Exogenous Break
No full textThis paper examines exchange–rate volatility with GARCH models using monthly exchange–rate return series from 1985:1 to 2011:7 for Naira/US dollar return and from 2004:1 to 2011:7 for Naira/British Pounds and Naira/Euro returns. The study compare estimates of variants of GARCH models with break in respect of the US dollar rates with exogenously determined break points. Our results reveal presence of volatility in the three currencies and equally indicate that most of the asymmetric models rejected the existence of a leverage effect except for models with volatility break. Evaluating the models through standard information criteria, volatility persistence and the log likelihood statistic, showed that results improved with estimation of volatility models with breaks as against those of GARCH models without volatility breaks and that the introduction of volatility breaks reduces the level of persistence in most of the models. The study recommends the incorporation of significant events in GARCH models in volatility estimation of key asset prices
Short-Term Inflation Forecasting Models for Nigeria
No full textShort-term inflation forecasting is an essential component of the monetary policy projections at the Central Bank of Nigeria. This paper proposes four short-term headline inflation forecasting models using the SARIMA and SARIMAX processes and compares their performance using the pseudo-out-of-sample forecasting procedure over July 2011 to September 2013. According to the results the best forecasting performance is demonstrated by the model based on the all items CPI estimated using the SARIMAX model. This model is, therefore, recommended for use in short-term forecasting of headline inflation in Nigeria. The forecasting performance up to eight months ahead, of the models based on the weighted sum of all items CPI components is relatively bad. For forecast of food inflation up to ten months ahead SARIMA is recommended, but for eleven to twelve months ahead the SARIMAX model performs better. However, the SARIMA model for core inflation consistently outperforms the SARIMAX model and should therefore be used to forecast core inflation
Financial inclusion initiatives and national economic development
No full textThe paper present a clear understanding of the term financial inclusion, its role in economic development, measures being adopted to forge financial inclusion by selected countries and the attempt being made by Nigerian to follow suit. Section two of this paper gives an overview of the concept financial inclusion, section three highlights the difference between financial inclusion and economic development. Section four presents country experiences on financial inclusion followed by highlights of the current state of financial inclusion in Nigeria