Modelling the Response of Fiscal Policy to External Shocks: The Case of Nigeria
Bernard Olagboyega Muse *
Department of Mathematics and Statistics, Rufus Giwa Polytechnic, P.M.B 1019, Owo, Nigeria
Uche, C. C. Nwogwugwu
Department of Economics, Nnamdi Azikiwe University, Awka, Nigeria
*Author to whom correspondence should be addressed.
Abstract
The study assesses the response of Nigerian fiscal policy to a number of external shocks, namely; oil price, foreign aid and exchange rate shocks using Vector Autoregressive (VAR) estimation approach. The results show that fiscal policy in Nigeria is responsive to external shocks mainly oil price shocks, while shocks due to government revenue are also shown as significant for explaining economic activities measured by GDP in Nigeria.
Keywords: Fiscal policy, external shock, autoregressive distribution analysis