International E-publication: Publish Projects, Dissertation, Theses, Books, Souvenir, Conference Proceeding with ISBN.  International E-Bulletin: Information/News regarding: Academics and Research

An assessment of alternative fiscal stimulus instruments in Nigeria: A DSGE analysis

    ,

Author Affiliations

  • 1Department of Entrepreneurship, SICHST, Makarfi, Nigeria
  • 2Department of Economics and Development Studies, Federal University, Dutsin-Ma, Nigeria

Int. Res. J. Social Sci., Volume 8, Issue (2), Pages 13-19, April,14 (2019)

Abstract

This paper sets out to ascertain the optimal fiscal stimulus instrument in Nigeria, based on its fiscal multiplier effect on key macroeconomic variables. This is done using a calibrated small open-economy New Keynesian DSGE model of the Nigerian economy augmented by rich fiscal sector incorporating government expenditure. Within this framework, the multiplier effects of three alternative fiscal stimulus instruments in the form of Government transfers, Government consumption expenditure, and Government investment are analysed. The main findings of this paper are; within the short-term period, government transfer shock is found to be more effective in stimulating the economy while, government investment shock has a larger impact in the long term. Therefore, the result suggests that the fiscal authority should spell out its priority clearly before selecting any fiscal instrument.

References

  1. Noko E. (2016)., Economic Recession in Nigeria, Causes and Solution., Available at: View. [Accessed April 16, 2017].
  2. CBN C.B.N. (2016)., Central Bank of Nigeria Communique M.P. Committee., Editor. 2016: Abuja.
  3. Almeida V., Castro G., Mourinho F. and Maria J.F. (2010)., Fiscal stimulus and exit strategies in a small euro area economy (No.w 201023).,
  4. Furceri D. and Mourougane A. (2010)., The effects of fiscal policy on output.,
  5. Coenen G., Straub R. and Trabandt M. (2012)., Fiscal policy and the great recession in the euro area., American Economic Review, 102(3), 71-76.
  6. Li S.M. and Spencer A.H. (2016)., Effectiveness of the Australian Fiscal Stimulus Package: A DSGE Analysis., Economic Record, 92(296), 94-120.
  7. Bhattarai K. and Trzeciakiewicz D. (2017)., Macroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis., Economic Modelling, 61, 321-338.
  8. Kara E. and Sin J. (2018)., The Fiscal Multiplier in a Liquidity‐Constrained New Keynesian Economy., The Scandinavian Journal of Economics, 120(1), 93-123.
  9. Iwata Y. (2009)., Fiscal Policy in an Estimated DSGE Model of the Japanese Economy: Do Non-Ricardian Households Explain All?., Economic and Social Research Institute, Cabinet Office.
  10. Beltran D. and Draper D. (2008)., Estimating the parameters of a small open economy DSGE model: Identifiability and inferential validity.,
  11. Calvo G.A. (1983)., Staggered prices in a utility-maximizing framework., Journal of monetary Economics, 12(3), 383-398.
  12. CBN C.B.N. (2013)., Dynamic Stochastic General Equilibrium Model for Monetary Policy Analysis in Nigeria.,
  13. Steinbach M.R., Mathuloe P.T. and Smit B.W. (2009)., An open economy New Keynesian DSGE model of the South African economy., South African Journal of Economics, 77(2), 207-227.
  14. Adebiyi M.A. and Mordi C.N.O. (2010)., Estimating Small Scale Macroeconometric Model (SSMM) For Nigeria: A Dynamic Stochastic General Equilibrium (DSGE) Approach., In EcoMod 2010-International Conference on Economic Modelling, 7-10.
  15. CBN (2013)., Dynamic Stochastic General Equilibrium Model for Monetary Policy Analysis in Nigeria., C.B.o.N.R. Department, Editor. 2013: Abuja. 106.
  16. Report (2018)., FIRS, F.I.R.S. Tax Types and Rates., [cited 2018; Available from: https://www.firs.gov.ng/SiteApplication/Home/Home.aspx..
  17. Almeida V., Castro G., Félix R.M. and Maria J.R. (2013)., Fiscal consolidation in a small euro-area economy., International Journal of Central Banking, 9(4), 1-38.