Homogenous Economic Policy and Heterogeneous Consumer Economy: Empirical Analysis of the Vulnerability of the Regions to Macroeconomic Policy in Nigeria

Abstract

This paper provides empirical evidence to show that regimented aggregate demand policy will probably be more appropriate for Nigeria given that the response of consumers to macroeconomic shocks is homogeneously tied around regional demand pattern. Result of the panel regression suggests that the effects of changes in income and price homogenously cut across the six regions, while response to expected rise in unemployment is substantially linked to the predominant employment structure in the regions. Exchange rate is shown to be a weak expenditure-switching instrument of policy variable since it does not have any known consistent pattern of impact. The paper argues for movement away from aggregate to region-specific economic policies based on the demand dynamics of the zones.

Keywords: Nigeria, vulnerably, heterogeneous demand, homogenous economic policy, panel model