CHAPTER ONE
1.1
INTRODUCTION
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 themselves.
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 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
SIGNIFICANT 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;
i. To
highlight the extent to which money supply affect the Gross Domestic Product
(GDP)
ii. To
asses the macroeconomic policies put in place in Nigerian economy from 1993-2010; to see if it has any positive or
negative effects on the Nigerian economy.
iii. 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 (CHN) various publications,
National Bureau of Statistic (NBS) and other relevant publication for a period
of fifteen (15) years (that is 1993- 2010).
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: Xl,X2,X3……Xn
by the following expression
Yt
= ?o + ?1Xl + ?2X2 + µ …… ?nXn where ?o is the
intercept and ?1,?2,?3......... ?n are unknown parameters called the
population regression, coefficient and µ 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
MODEL
GDP = F
(GOVERNMENT EXPENDITURE, MONEY SUPPLY)
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
covers macroeconomic policies in Nigeria for a period of eighteen years,
starting from 1993 to 2010.
The limitations 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 CHAPTERlZATION OF THE STUDY
This study is divided into five chapters.
In the
first chapter, which is the introduction, various objectives intended to be
achieved in carrying out this research work are looked into. In addition, the research
hypothesis as well as the scope and limitation of the study are stated among
other things.
Chapter
two, which is the literature review, examines 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 is discuss.
Chapter four contains data analysis. The data analyzed are obtained from
secondary data majorly from the CBN publication. These data is 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 is presented in chapter five.
REFERENCES
Bakare I.A.O (2003): Fundamentals and Practice of
Macroeconomics. Giitbbak Publisher.
Hornby A. S. Oxford Advanced Learners Dictionary of
Current English (7h ED). Oxford
University Press.
ICAN Study Pack (2006): Business Communication and
Research Methodology. VI Publishing Limited.
Jhingan M. L. (2006). Macro Economic theory (10th
ed) VRINDA Publications (P) LTD.
Robert H. F and Ben S. S (2004) Principles of
Economics (2na ED). Gary Burke