This research work tries to investigate
the effectiveness of macroeconomic policy in promoting economic growth
in Nigeria. Macroeconomic policies, which is defined as government
actions designed to affect the performance of the economy as a whole.
Data used in this research (GDP, government expenditure, money supply)
was mainly secondary, specifically from the Central Bank of Nigeria
(CBN). These data were analysed using econometric technique. After the
data analysis, it was discovered that money supply has a positive
relationship with the GDP while the government expenditure is
universally related with GDP. Also, the monetary and fiscal policies
were compared. At the end of the research, conclusions were drawn and
reasonable recommendations were given.
TABLE OF CONTENTS
1.2 Statement of problems
1.3 Significance of the study
1.4 Aim and objectives of the study
1.5 Research methodology
1.6 Statement of hypothesis
1.7 Scope/limitation of the study
1.8 Chapterization of the study
CHAPTER TWO: LITERATURE REVIEW
2.2 Conceptual overview of macroeconomic policy
2.3 Major goals of macroeconomic policy
2.3.1 Economic growth
2.3.2 Full employment
2.3.3 Economic equity
2.3.4 Stabilizing balance of payment
2.3.5 Price stability
2.4 Types of macroeconomic policy
2.4.1 Monetary policy
2.4.2 Fiscal policy
2.5 Monetary versus fiscal policy
2.5.1 Keynesian range
2.5.2 The classical for monetarist range
2.5.3 The intermediate range
MACROECONOMIC POLICY IN NIGERIA (1993-2007)
3.2 Policy implementation agencies
3.3 Monetary and fiscal policies in Nigeria: between1994-2007
3.4 The global financial crisis
3.5 Problems of macroeconomic policy in Nigeria
3.6 Policy recommendations
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.2 Methods of analysis
4.2.1 Regression analysis
4.2.2 Correlation technique
4.2.3 Hypothesis test
4.2.4 Durbin Watson test
4.3 Sources of data
4.3.1 Model specification and hypothesis
4.3.2 Apriori expectation
4.3.3 Specification bias
4.4 Data presentation
4.5 Interpretation of result
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary of finings
5.4 Area for further research
1.1 BACKGROUND TO THE STUDY
It has been historically evidenced that
market mechanism does not ensure general equilibrium and stability in
the economy. As a result, macroeconomic problems-business cycles,
inflation, deflation, stagflation and unemployment continue to arise
time and again. Therefore, government is forced to adopt policy measures
to redress the problems as and when they arise. If governments are to
intervene in the economy, there still remains the problem of selecting
the appropriate instruments of achieving the targets they set for
Macroeconomics, which was introduced by
Ragnar Frisch in 1933 during the period of great depression globally,
applies to the study of relations between broad economic aggregates. It
refers to the study of the performance of the national economy as well
as the policies used to improve that performance. Policy on the other
hand, according to the Oxford Advanced Learner's Dictionary means plan
action agreed or chosen by a political party, business etc.
Macroeconomic polices therefore, can be
defined as government actions designed to affect the performance of the
economy as a whole. It can also be defined as a programme of action
undertaken to control, regulate and manipulate macroeconomic variables
to achieve the macroeconomic goals of the society. In the words of
Brooks and Evans, "Macroeconomic policy can be thought of as an attempt
by the authorities to achieve particular target levels of certain major
economic aggregates". A macroeconomic policy is, infact an instrument of
policing the economy (if one may use that phrase) to achieve certain
economic goals. As regards the scope of macroeconomic policy, it
encompasses all major economic variables. Macroeconomic variables
include both real and monetary variable. Real variables include, Gross
National Product (GNP), Total Employment, Aggregate Expenditure, Saving
and Investment Government Expenditure as well as tax and Non-Tax
Revenue, Exports and Imports and the balance of Payment, Monetary
Variables include supply of money, demand for money, supply of credit,
bank deposit as well as interest rate. Accordingly, there are two kinds
of tools or measure to control and regulate the macroeconomic variables
namely; monetary measure and fiscal measure.
Some economist believes that "The need
for macroeconomic policy arises because the economic system does not
adjust appropriately to the shocks to which it is constantly subjected".
However, the role of macroeconomic policy did not remain confined to
controlling business cycles, it was extended far beyond.
Before and after Nigeria got her
independence in 1960, the Nigerian economy can be characterized as an
economy that has witnessed a variety of macro economic policies, not all
have however, succeeded in achieving the laid down objectives of the
macroeconomic polices. In the past few years, the Nigerian economy has
witnessed serious macroeconomic problems, characterized by slow down in
economic activities, low capacity utilization, growing unemployment,
heavy debt burden, accelerated inflation, intensified exchange rate
depreciation, as well as high and perverted regime of interest rates.
1.2 STATEMENT OF PROBLEMS
The motive of any development effort is
to bring about improvement in the standard of living of the people. It
is to this end that macroeconomic objectives are directed. Therefore, it
follows that there is a functional and significant relationship between
macroeconomic policies and stated objectives. The economy of developing
countries like Nigeria is characterized by a lot of economic problems
such as high rate of inflation, unemployment, unfovourable balance of
payment and many others. Over the years, many instrument of
macroeconomic policy have been employed to check these backward
phenomena. Hence, this study aims towards evaluating effectiveness of
these macroeconomic policies in achieving predetermined target.
1.3 SIGNIFICANCE OF THE STUDY
It is hoped that this research work will
be practically and theoretically significant as it will contribute to
and move the frontiers of knowledge. There is no doubt that this study
will benefit quite a number of people.
In -the first instance, the
research work will be extremely important to students in their academic
pursuit. Secondly, experts and policy makers will find it a good and
useful companion in their effort to formulate policies. Furthermore,
this research work will equally be germane to the state, in that it will
enhance effective and efficient formulation and implementation of
policies with a view to achieving macroeconomic objectives.
1.4 AIM AND OBJECTIVES OF THE STUDY
In the literature of macroeconomic
theory, some serious prepositions have been made as to the effectiveness
or otherwise of macroeconomic policy especially in the developing
countries like Nigeria. In view of this, the aim of this study is to
assess the effectiveness of macroeconomic policy in promoting economic
growth in Nigeria. The objectives are;
- To highlight the extent to which money supply affect the Gross Domestic Product (GDP)
- To asses the macroeconomic policies put in place in Nigerian economy
from 1993-2007; to see if it has any positive or negative effects on
the Nigerian economy.
- To evaluate the effect of major macroeconomic variable on the Gross Domestic Product (GDP).
1.5 RESEARCH METHODOLOGY
This consists of the following:
1.5.1 SOURCES OF DATA
This research work is limited to
secondary source of data. The secondary data shall be obtained basically
from Central Bank of Nigeria (CBN) various publications, National
Bureau of Statistic (NBS) and other relevant publication for a period of
fifteen (15) years (that is 1993-2007).
1.5.2 METHOD OF DATA ANALYSIS
After the data needed must have
obtained, it shall be analyzed via the use of statistical and
econometric methodology such as simple regression, multiple regression
and variance analysis. The study will also go further to conduct the
test of significant standard error and F-test
1.5.3 MODEL SPECIFICATION
In a linear multiple regression model,
the dependent or explained variable (Y) is related to a number of
independent or explanatory variables; X1,X2,X3........ Xn by the following expression
Yt = ?o + ?1X1 + ?2X2 + µ ... ?nXn where ?o is the intercept and ?l,?2,?3......... ?n are unknown parameters called the population regression, coefficient and µ is the random or stochastic variable
Using linear regression model, the
functional relationship between gross domestic product (GDP) Government
expenditure and money supply is estimated as follows;
GDP= F(MOS, Govt. Exp)
Where GDP is the dependent variable
MOS = Money Supply
GDP = F(GOVERNMENT EXPENDITURE, MONEY SUPPLY)
GDP = ?o +?1X1 + ?2X2 + Ut
1.6 STATEMENT OF HYPOTHESIS
Ho: Money Supply and Government Expenditure does not have significant effect on the gross domestic product (GDP).
H1: Money Supply and Government Expenditure has a significant effect on gross domestic product (GDP).
1.7 SCOPE/LIMITATION OF THE STUDY
The study will cover macroeconomic policies in Nigeria for a
period of fifteen years, starting from 1993 to 2007.
The limitation of this study are those
conceptual problems which the research work would encounter. These
include time and inadequacy of funds for the research.
Another limitation is that of inadequate
and inaccurate database in less developed countries in which Nigeria is
not an exception. However, the research will make efficient use of
available time and data at his disposal towards the realization of the
goals of the study
1.8 CHAPTERIZATION OF THE STUDY
This study will be divided into five chapters .
In the first chapter, which is the
introduction, various objectives intended to be achieved in carrying out
this research work will be looked at. In addition, the research
hypothesis as well as the scope and limitation of the study will be
stated among other things.
Chapter two, which is the literature
review examine the two macroeconomic policies (monetary policy and
fiscal policy) in detail, as well as its impacts in promoting economic
growth in Nigeria.
In Chapter three, which is the structural composition, the macroeconomic policy as it affect Nigeria will be discuss.
Chapter four contains data analysis. The
data to be analyzed will be obtained from secondary data majorly from
the CBN publication. These data will be analyzed through the use of the
statistical Package for Social Science (SPSS) with the use of
econometrics technique, specifically, regression analysis.
The summary, conclusion and recommendation will be presented in chapter five.
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