IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 9 NO. 6 2023

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Impact of Macroeconomic Shocks on Fiscal Policy Behaviour in Nigeria

Oguntuase Adeniyi (Ph.D)

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Abstract

The inability of fiscal policy to achieve its sets of macroeconomic objectives in the recent times has been traced to interference from some sets of macroeconomic shocks which require investigation in order to bring about policy recommendations that will make fiscal policy less- vulnerable to these shocks and hence improve its effectiveness in achieving its macroeconomic objectives. This study investigated the impact of macroeconomic shocks on fiscal policy behaviour in Nigeria. Auto-regressive distributed lags (ARDL) was used to achieve the impact of macroeconomic shocks on fiscal policy behaviour in Nigeria. Findings from the study revealed that shocks like government expenditure, government revenue, oil price volatility and commodity price volatility all constitute long run shocks to fiscal policy behaviour in Nigeria while variables like exchange rate, interest rate, inflation rate, external debt and external reserve constitute more of transitory shocks to fiscal behaviour in Nigeria. The study generally recommends expansion of domestic outputs to reduce the vulnerability of fiscal policy to both external and internal shocks. This will make fiscal policy more effective in achieving its set macroeconomic objectives.

keywords:

Macroeconomic Shocks, Fiscal Policy, Government Expenditure, Government Revenue

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