Fiscal Approach to Balance of Payments:A Case of Nigeria
Abstract:
This research study focused on fiscal approach to balance of payment balance of payments in Nigeria by evaluating the impact of fiscal deficit on current account balance in the country. The scope of the study spanned from 1970 to 2010. The methodologies employed in this study are unit root testing, cointegration and Granger Causality test. The variables used in the study are current account, fiscal deficit, real GDP, nominal Effective Exchange Rate (ERR) and prime rate which are the determinants of balance of payments. The test for stationarity using Augmented Dickey Fuller (ADF), Philip-Perron (PP) and Kwiatkowski–Phillips–Schmidt–Shin (KPSS) tests were conducted and the results showed that all the variables were not stationary in levels but were stationary in first difference. The Johansen-Juselius co-integration techniques were employed in testing for long run equilibrium relationship among the variables and the results indicated that no cointegrating relationship was found among the variables. The causal long term relationship between budget deficit and current account was tested using Pair wise Granger causality test. The result from the test showed that fiscal deficit causes current account deficits indicating a unidirectional causality between fiscal deficit and current account deficit. The study recommends among others the export promotion and import substitution strategies to increase the non-oil exports and reduce the volume of imports and the overvaluation of the official naira exchange rates.ORDER COMPLETE MATERIAL (CHAPTER 1-5)
