Fiscal Policy and Economic Growth: A Study on Nigerian Economic Perspective

Abstract

This paper examines the impact of fiscal policy on economic growth of the Nigerian economy. The study used data from 1970 to 2011 and employed Engel-Granger cointegration for long-run relationship, ordinary least square for long-run estimate and diagnostic test for consistency of instruments. Empirical findings show that fiscal policy exerts a significant positive effect on economic growth, which indicates that appropriate fiscal measures stimulate the Nigerian economic growth. Thus, government spending has a greater impact on the growth rate of the Nigeria economy. There is need for continuous increase and growth of the nation’s output by ensuring that government spending is channelled into sectors that best guarantees efficient and effective usage.

Keywords: Fiscal balances, economic growth, government spending, investment, Nigeria.