Impact of Monetary Policy and Fiscal Policy on Economic Growth in Nigeria

Abstract

Monetary policy and Fiscal policy are Macroeconomic instruments used in regulating the financial operations in an economy towards the economic growth. Vast researches have been undertaken and empirical evidences proved that, both policies have to be efficiently and effectively maintained for a sustainable economic growth. The objective of this study is to establish the relationship between the monetary and fiscal policy with economic growth in Nigeria, and determine the suitable percentage mix of the policies. The study uses Money supply, Tax revenue generated and GDP as element of Monetary, Fiscal and Economic Growth respectively, for the period of 10years, from 2006 -2015. Pearson correlation technique was used to establish the relationship between the dependent and independent variables. The analyses revealed that; Money supply made the most significant contribution to prediction of GDP in Nigeria than Tax revenue generated. The results of these findings are however translated to proportion of percentage mix as 87% and 13% for monetary and fiscal policy respectively. Therefore if government increases expenditures, it should also adopt the necessary measures that will necessitate income generation, as well provides governing policies to lower the expense of the income on consumable goods.

Key words: monetary policy, fiscal policy, economic growth

DOI: 10.7176/JESD/10-24-16

Publication date: December 31^st 2019