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A dynamic fragmentation of the misery index in Nigeria

Author

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  • K. Moses Tule
  • Eunice Ngozi Egbuna
  • Eme Dada
  • Godday Uwawunkonye Ebuh

Abstract

This study adopts a dynamic approach to compute the level of economic distress in Nigeria. Quarterly series from 2002Q1 to 2016Q4 were utilized in computing the index. Leveraging on the expectations-augmented Phillips curve and Okun’s law, the results obtained indicate a minimum and maximum misery values of 16.92% (2007Q3) and 53.42% (2016Q4), respectively, with an average value of 31.49% over the study horizon. The index recorded a skewness of 0.31% indicating moderate level of asymmetry and a kurtosis of 3.26% indicating that the index is leptokurtically distributed with an approximate standard deviation of 8.00%. This implies the presence of appreciable level of volatility. A plot of crude oil price with the misery index overall shows that as price increased, the misery index decreased but in some instances, increase in crude oil price was consistent with increased misery. The persistent insecurity and militancy activities may have accounted for the observed puzzling co-movement. The computation also indicates that decrease in expected variation in inflation, results in increased unemployment by 61.0 per cent decrease in the variation in expected inflation associated with a unit change in the variation between the potential and actual rates of unemployment over the study horizon, which confirms theoretical expectations. On the whole, the results suggest that economic well-being in Nigeria has worsened over the years, especially between 2013Q3 and 2016Q4. The study, therefore, recommends sustained policies aimed at diversifying the revenue base of the economy away from heavy dependence on crude oil. This has the capacity to obviate the hardship occasioned by the fall in oil price and reduction in oil production.

Suggested Citation

  • K. Moses Tule & Eunice Ngozi Egbuna & Eme Dada & Godday Uwawunkonye Ebuh, 2017. "A dynamic fragmentation of the misery index in Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1336295-133, January.
    • Handle: RePEc:taf:oaefxx:v:5:y:2017:i:1:p:1336295
    DOI: 10.1080/23322039.2017.1336295
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    References listed on IDEAS

    as
    1. Moses Tule & Taiwo Ajilore & Godday Ebuh, 2016. "A composite index of leading indicators of unemployment in Nigeria," Journal of African Business, Taylor & Francis Journals, vol. 17(1), pages 87-105, January.
    2. J. M. Golden & Robert Orescovich & David Ostafin, 1987. "Optimality on the Short-Run Phillips Curve: A “Misery Index†Criterion, a Note," The American Economist, Sage Publications, vol. 31(2), pages 72-72, October.
    3. Ivan K. Cohen & Fabrizio Ferretti & Bryan McIntosh, 2014. "Decomposing the misery index: A dynamic approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-8, December.
    4. Bijou Yang, 1992. "Optimality on the Short-Run Phillips Curve Revisited," The American Economist, Sage Publications, vol. 36(2), pages 89-91, October.
    5. Michael C. & Pao-Lin Tien, 2000. "Economic Discomfort and Consumer Sentiment," Eastern Economic Journal, Eastern Economic Association, vol. 26(1), pages 1-8, Winter.
    6. Peter A. Zaleski, 1990. "On the Optimal Level of Macroeconomic Misery: A Comment," The American Economist, Sage Publications, vol. 34(2), pages 90-91, October.
    7. J. M. Golden & Robert Orescovich & David Ostafin, 1990. "Optimality on the Short-Run Phillips Curve: A “Misery Index†Criterion, a Reply," The American Economist, Sage Publications, vol. 34(2), pages 92-92, October.
    8. Clark Wiseman, 1992. "More on Misery: How Consistent Are Alternative Indices? A Comment," The American Economist, Sage Publications, vol. 36(2), pages 85-88, October.
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    Cited by:

    1. Sakiru Adebola Solarin & Luis A. Gil-Alana & Carmen Lafuente, 2020. "Persistence of the Misery Index in African Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(3), pages 825-841, February.

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