Abstract:
Low output growth in Nigeria have been attributed to a number of factors such as poor technology, demographic factors, social conditions, poor macroeconomic policies, insufftcient infiastructural facilities and high dependence on primary products. What however, attracts lesser attention is the interface between output growth and macroeconomic fluctuations. It is not only that output growth is low but it fluctuates beyond the expectations of different macroeconomic analysts. There have been varying results among different existing empirical studies on the determinants of output growth in Nigeria. Most of these studies used cross-country regression to estimate the determinants of output growth. Cross country regressions suffer from measurement and specification bias because of the heterogeneous nature of macroeconomic data among less developed countries. The current study adds to the existing literature by capturing the volatility clustering of economic growth and its determinants using country specific regression. It also addresses the problem of the relationship between current shock on economic growth and conditional volatility of other periods ahead. This is useful for forecasting volatility of economic growth and other macroeconomic variables. It fbrther addresses the problem of determining the factors that are responsible for economic growth and how structural shocks are transmitted among macroeconomic variables in Nigeria. The study adopted two approaches: The Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH) and Vector Error Correction (VEC) models. EGARCH model was used to trace the determinants of economic fluctuations and the volatility clustering of economic growth. The VEC model traced the transmission of structural shocks among the variables. The results show that fluctuations in economic growth is positively determined by the level of inflation rate, real interest rate, unemployment rate, but negatively influenced by investment ratio, per capita income, real exchange rate and the degree of trade openness It hrther shows that there is transmission of structural shocks between econon~icg rowth and its determinants. However, the transmission mechanism of these shocks is complex and difficult to determine. The result of the conditional variance shows that there is high degree of volatility clustering between economic growth and its determinants. The News Impact Curve (NIC) indicates that the current shock is influenced by the previous shocks and its effect on other period ahead decays exponentially.
