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Examining the Effects of Fiscal-Monetary Policy Interactions on Unemployment Rates in Nigeria (1985-2023)

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  • I. O. Olurinola

    (Department of Economics, Anchor University, Lagos State, Nigeria)

  • I.E. Egbe

    (Department of Economics, Anchor University, Lagos State, Nigeria)

Abstract

Despite the abundance of natural resources in Nigeria, the problem of unemployment is still intractable; and thus, has made Nigeria to be ranked among the nations with the highest rate of unemployment in sub-Saharan Africa. This study therefore seeks to assess how effective a mix of monetary and fiscal policy is at addressing the scourge of unemployment in Nigeria over time. The IS-LM framework formed the theoretical basis of this study. This study used secondary data collected from various sources for a period of 39 years, from 1985-2023. For the analysis, the Auto-regressive Distributed Lag (ARDL) method was used alongside the Bounds test approach and other post estimation tests. The study estimated both the short-run and long-run effects of the interactive economic variables on unemployment in Nigeria. The study found that monetary policy instruments alone have significant and positive relationships on employment, while the fiscal policy variables were not significant in both short-run and long-run. However, the study also revealed that in Nigeria, the interaction of some of these two policies are significant and depict a negative relationship with the rate of unemployment, while others were not significant which could be as a result of a poor implementation structure in the Nigerian context. The study recommends that before the economy implements an effective policy mix, there should be a proper review to these policies to ensure that one is not more dominant than the other, as this study revealed. Interest rates should be such that would encourage investment, productivity and job creation. Also, the government should ensure that the effects of their expenditure is seen with respect to employment generation and provision of amenities for economic progress.

Suggested Citation

  • I. O. Olurinola & I.E. Egbe, 2024. "Examining the Effects of Fiscal-Monetary Policy Interactions on Unemployment Rates in Nigeria (1985-2023)," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(9), pages 152-167, September.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:9:p:152-167
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    References listed on IDEAS

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    1. Barnabas Amu & Evans S. Osabuohien & Philip O. Alege & Jeremiah O. Ejemeyovwi, 2021. "Impact of Real Shocks on Business Cycles in selected Sub-Saharan African Countries," Cogent Business & Management, Taylor & Francis Journals, vol. 8(1), pages 1875548-187, January.
    2. Mr. Thomas Baunsgaard, 2003. "Fiscal Policy in Nigeria: Any Role for Rules?," IMF Working Papers 2003/155, International Monetary Fund.
    3. Dubravko Mihaljek, 2021. "Interactions between fiscal and monetary policies: a brief history of a long relationship," Public Sector Economics, Institute of Public Finance, vol. 45(4), pages 419-432.
    4. Eleonora Herrera-Medina & Antoni Riera Font, 2023. "A Game Theoretic Approach to Collaboration in Policy Coordination," Economies, MDPI, vol. 11(10), pages 1-9, October.
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