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Evaluating the Relative Impact of Monetary and Fiscal Policy in Nigeria using the St. Louis Equation

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  • Michael Adebayo Ajayi

    (University of Ilorin)

  • Olufemi Adewale Aluko

    (University of Ilorin)

Abstract

The controversy existing on the efficacy of monetary and fiscal policy to influence the economy is unending. This study evaluates the relative impact of monetary and fiscal policy in Nigeria from 1986 to 2014 using a modified St. Louis equation. Employing the Ordinary Least Squares estimation method, this study reveals that growth in money supply and export have a positive and significant effect on growth in output of the economy while growth in government expenditure has a negative and insignificant effect. This study provides evidence that monetary policy has a greater growth-stimulating effect on the economy than fiscal policy. It recommends that monetary policy rather than fiscal policy should be relied upon by the Nigerian government as an economic stabilisation tool.

Suggested Citation

  • Michael Adebayo Ajayi & Olufemi Adewale Aluko, 2017. "Evaluating the Relative Impact of Monetary and Fiscal Policy in Nigeria using the St. Louis Equation," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(1), pages 40-50, February.
    • Handle: RePEc:dug:actaec:y:2017:i:1:p:40-50
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    File URL: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/3670/3849
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    References listed on IDEAS

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    1. Vafa Moayedi, 2013. "Reassessing The Effect Of Fiscal And Monetary Policies In Iran: The St. Louis Equation Revisited," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(4), pages 123-141, December.
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    Cited by:

    1. Olufemi Samuel Adegboyo & Sunday Anderu Keji & Oluwadamilola Tosin Fasina, 2021. "The impact of government policies on Nigeria economic growth (case of fiscal, monetary and trade policies)," Future Business Journal, Springer, vol. 7(1), pages 1-14, December.
    2. Godwin Emmanuel, Oyedokun & Aminat Murtala, Abdulazeez, & Moyosore Akingbade, Adewumi,, 2021. "Fiscal Policy and Investment Growth in Nigeria," Multidisciplinary Journal of Management Sciences, Association of Forensic Accounting Researchers (AFAR), vol. 3(2), pages 92-102, July - Se.
    3. Cemal Ozturk & Gunsenin Altinkaynak, 2022. "Asymmetric Effectiveness of Monetary and Fiscal Policies: Evidence from Turkey," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 8(1), pages 1-14, June.
    4. Israa A. El Husseiny, 2023. "The relative effectiveness of fiscal and monetary policies in promoting Egypt’s output growth: an empirical investigation using an ARDL approach," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 12(1), pages 1-23, December.

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