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Ismail Fasanya
University of the Witwatersrand Business School
Corresponding Author
ORCiD: https://orcid.org/0000-0001-5816-4815
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In this paper, we model the relationship between fiscal deficit and inflation for Nigeria using annual data from 1980 to 2019. We employ the Linear ARDL approach and also account for structural breaks using the Bai and Perron (2003) test that allows for multiple structural changes in regression models.The paper finds that fiscal deficit is a major determinant of inflation along with other macroeconomic factors considered in the study. However, we observe that it may be necessary to pre-test for structural breaks when modelling the relationship between fiscal deficit and price level as it performs better than when structural events are not considered.The results imply that a fiscal management process that does not encourage increased revenue and reduce fiscal deficits in Nigeria will further worsen the level of inflation in the country.
Keywords
Fiscal deficit, Price level, ARDL cointegration, Structural breaks JEL Classification Codes: C32, E31, E62
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A new preprint design is coming!
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This is a preprint, a preliminary version of a manuscript that has not completed peer review at a journal. Research Square does not conduct peer review prior to posting preprints. The posting of a preprint on this server should not be interpreted as an endorsement of its validity or suitability for dissemination as established information or for guiding clinical practice.
Research
Ismail Fasanya
University of the Witwatersrand Business School
Corresponding Author
ORCiD: https://orcid.org/0000-0001-5816-4815
Badges
Prescreen
This manuscript passed our Prescreen assessment
Complete author information
Appropriate declaration statements
Potential risks to human health
Prescreen
History
CURRENT STATUS: Posted
Version 1
Posted 16 Jun, 2020
No community comments so far
Metrics
Comments: 0
PDF Downloads: ...
HTML Views: ...
Subject Areas
Other Economics
License:
This work is licensed under a CC BY 4.0 License. Read Full License
In this paper, we model the relationship between fiscal deficit and inflation for Nigeria using annual data from 1980 to 2019. We employ the Linear ARDL approach and also account for structural breaks using the Bai and Perron (2003) test that allows for multiple structural changes in regression models.The paper finds that fiscal deficit is a major determinant of inflation along with other macroeconomic factors considered in the study. However, we observe that it may be necessary to pre-test for structural breaks when modelling the relationship between fiscal deficit and price level as it performs better than when structural events are not considered.The results imply that a fiscal management process that does not encourage increased revenue and reduce fiscal deficits in Nigeria will further worsen the level of inflation in the country.
The full text of this article is available to read as a PDF.
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