The Effects of Macroeconomic Policies on Economic Growth of Nigeria: A Time Series Analysis

Abstract

This study examines the effects of macroeconomic policies on economic growth in Nigeria using annual time-series data covering 1980–2022. The analysis focuses on selected fiscal and monetary policy instruments, namely interest rate, exchange rate, government expenditure and government borrowing, and assesses their short-run and long-run relationships with real gross domestic product. An ex post facto research design was adopted, while the Autoregressive Distributed Lag approach was used to analyse the dynamic relationships among the variables after testing for stationarity. The descriptive results show variations in the behaviour of the selected macroeconomic indicators over the study period. The unit root results indicate a mixture of I(0) and I(1) variables, justifying the use of the ARDL framework. The bounds test confirms the existence of a long-run relationship among the variables. The empirical results show that interest rate has an insignificant relationship with economic growth, while exchange rate has a significant negative short-run relationship. Government expenditure has a positive relationship with economic growth, with stronger statistical relevance in the long run. Government borrowing also shows a positive long-run relationship with growth, although short-run effects are mixed. The study concludes that stabilisation policies may support economic growth when fiscal and monetary measures are coherent, disciplined and supported by effective policy transmission mechanisms.