Growth-Effects of Macroeconomic Stability Factors: Empirical Evidence from Nigeria

Abstract

This study empirically examines the growth-effects of macroeconomic stability factors in Nigeria. Using time series data for the period 1980 to 2011 and adopting various econometric techniques such as Augmented Dickey Fuller (ADF) test, Granger causality test, and Error Correction Mechanism (ECM), the results reveal that real interest rate significantly affects growth positively, while external debt and real exchange rate impact negatively on growth in the country. The study, however, concludes that for macroeconomic stability to be achieved in Nigeria, each of the factors should be examined individually such that its respective effect on growth could be identified while appropriate policy would be formulated and implemented where required.

JEL Classification: B22; E4

Keywords: Macroeconomic stability, Growth, Error correction mechanism, Inflation, External debt, Causality