The Effectiveness of Fiscal Policy on Inflation Control in Nigeria (1981-2013)

Abstract

The study investigates the effectiveness of fiscal policy on inflation control in Nigeria. Augmented Dickey Fuller (ADF) was adopted in determining the stationary condition of the variables. The variables were stationary at first difference. Thus Johanson co-integration test was employed to test for the convergence of the variables. The result revealed that there is existence of long run convergence and thus, the variables were co-integrated. However, error correction technique was used to minimize the effect of spurious regression. The overall result showed that the inflation rate in Nigeria is not exogenous and therefore the variables only respond to policy shocks.

Keywords: Fiscal policy, inflation, and policy implication.