IDEAS home Printed from https://ideas.repec.org/a/taf/oaefxx/v9y2021i1p1921905.html
   My bibliography  Save this article

Public debt and inflation nexus in Nigeria: An ARDL bounds test approach

Author

Listed:
  • Akingbade U. Aimola
  • Nicholas M. Odhiambo
  • Christian Nsiah

Abstract

Inflationary tendencies of public debt have been the cause of an unsettling debate among policymakers in Nigeria. Using the autoregressive distributed lag (ARDL) framework, this study attempts to investigate the impact of total public debt on inflation in Nigeria for the period 1983–2018. The cointegrating regression results reveal evidence of a stable long-run relationship among inflation, total public debt, money supply, interest rate, economic growth, trade openness, and private investment in the presence of structural breaks. Empirical results show that the impact of public debt on inflation is statistically insignificant, irrespective of whether the regression was in the short or the long run. Hence, the study concludes that inflation in Nigeria could be driven by other factors other than public debt.

Suggested Citation

  • Akingbade U. Aimola & Nicholas M. Odhiambo & Christian Nsiah, 2021. "Public debt and inflation nexus in Nigeria: An ARDL bounds test approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1921905-192, January.
    • Handle: RePEc:taf:oaefxx:v:9:y:2021:i:1:p:1921905
    DOI: 10.1080/23322039.2021.1921905
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/23322039.2021.1921905
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/23322039.2021.1921905?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barro, Robert J, 1989. "The Ricardian Approach to Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 37-54, Spring.
    2. Michael Woodford, 1998. "Doing Without Money: Controlling Inflation in a Post-Monetary World," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 173-219, January.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. Catao, Luis A.V. & Terrones, Marco E., 2005. "Fiscal deficits and inflation," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 529-554, April.
    5. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, vol. 100(2), pages 573-578, May.
    6. Lin, Hsin-Yi & Chu, Hao-Pang, 2013. "Are fiscal deficits inflationary?," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 214-233.
    7. Thomas J. Sargent & Neil Wallace, 1984. "Some Unpleasant Monetarist Arithmetic," Palgrave Macmillan Books, in: Brian Griffiths & Geoffrey E. Wood (ed.), Monetarism in the United Kingdom, pages 15-41, Palgrave Macmillan.
    8. Olivier Blanchard, 2004. "Fiscal Dominance and Inflation Targeting: Lessons from Brazil," NBER Working Papers 10389, National Bureau of Economic Research, Inc.
    9. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(3), pages 345-380.
    10. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    11. José Augusto Lopes da Veiga & Alexandra Ferreira-Lopes & Tiago Neves Sequeira, 2016. "Public Debt, Economic Growth and Inflation in African Economies," South African Journal of Economics, Economic Society of South Africa, vol. 84(2), pages 294-322, June.
    12. Odhiambo, Nicholas M., 2009. "Energy consumption and economic growth nexus in Tanzania: An ARDL bounds testing approach," Energy Policy, Elsevier, vol. 37(2), pages 617-622, February.
    13. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
    14. Majid Taghavi, 2000. "Debt, growth and inflation in large European economies: a vector auto-regression analysis," Journal of Evolutionary Economics, Springer, vol. 10(1), pages 159-173.
    15. Woodford, Michael, 2001. "Fiscal Requirements for Price Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(3), pages 669-728, August.
    16. van Wijnbergen, Sweder & Budina, Nina, 2001. "Inflation Stabilization, Fiscal Deficits, and Public Debt Management in Poland," Journal of Comparative Economics, Elsevier, vol. 29(2), pages 293-309, June.
    17. BILDIRICI, Melike & ERSIN, Ozgur Omer, 2007. "Domestic Debt, Inflation And Economic Crises: A Panel Cointegration Application To Emerging And Developed Economies," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 7(1).
    18. Beck-Friis, Peder & Willems, Tim, 2017. "Dissecting fiscal multipliers under the fiscal theory of the price level," European Economic Review, Elsevier, vol. 95(C), pages 62-83.
    19. Michael Woodford, 1998. "Control of the Public Debt: A Requirement for Price Stability?," International Economic Association Series, in: Guillermo Calvo & Mervyn King (ed.), The Debt Burden and its Consequences for Monetary Policy, chapter 5, pages 117-158, Palgrave Macmillan.
    20. Bleaney, Michael, 1996. "Inflation and Public Debt," Australian Economic Papers, Wiley Blackwell, vol. 35(66), pages 141-155, June.
    21. Tamunonimim Anipiriworima Ngerebo-A, 2014. "Domestic Debt Burden, Debt Overhang and Inflationary Pressure in Nigeria," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 3(3), pages 172-183.
    22. Aimola Akingbade U. & Odhiambo Nicholas M., 2020. "Public Debt and Inflation: A Review of International Literature," Folia Oeconomica Stetinensia, Sciendo, vol. 20(1), pages 9-24, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mesbah Fathy Sharaf & Abdelhalem Mahmoud Shahen, 2023. "Does external debt drive inflation in Sudan: evidence from symmetric and asymmetric ARDL approaches," Journal of Business and Socio-economic Development, Emerald Group Publishing Limited, vol. 3(4), pages 293-307, August.
    2. Aimola Akingbade U. & Odhiambo Nicholas M., 2022. "Is the effect of public debt on inflation symmetric or asymmetric? Evidence from the Gambia," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 8(1), pages 41-57, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Akingbade U. Aimola & Nicholas M. Odhiambo & Christian Nsiah, 2021. "Public debt and inflation nexus in Nigeria: An ARDL bounds test approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1921905-192, January.
    2. Aimola, Akingbade U & Odhiambo, Nicholas M, 2021. "Public debt and inflation: Empirical evidence from Ghana," Working Papers 27063, University of South Africa, Department of Economics.
    3. Akingbade U. Aimola & Nicholas M. Odhiambo, "undated". "Public Debt and Inflation: Empirical Evidence from Ghana," Working Papers AESRIWP06, African Economic and Social Research Institute (AESRI).
    4. Aimola Akingbade U. & Odhiambo Nicholas M., 2020. "Public Debt and Inflation: A Review of International Literature," Folia Oeconomica Stetinensia, Sciendo, vol. 20(1), pages 9-24, June.
    5. Godwin Essang Esu,(PhD), 2023. "Fiscal Imbalances, Economic Growth and Macroeconomic Stability in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(8), pages 887-901, August.
    6. Aimola Akingbade U. & Odhiambo Nicholas M., 2022. "Is the effect of public debt on inflation symmetric or asymmetric? Evidence from the Gambia," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 8(1), pages 41-57, June.
    7. Bilal Raza & Khurram S Mughal, 2022. "Fiscal Determinants of Inflation in Pakistan," SBP Working Paper Series 108, State Bank of Pakistan, Research Department.
    8. Ismail O. Fasanya & Ayinke Fajobi & Abiodun Adetokunbo, 2021. "Are Fiscal Deficits Inflationary In Nigeria? New Evidence From Bounds Testing To Cointegration With Structural Breaks," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 66(228), pages 123-148, January –.
    9. David B. Gordon & Eric M. Leeper, 2006. "The Price Level, The Quantity Theory Of Money, And The Fiscal Theory Of The Price Level," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(1), pages 4-27, February.
    10. Buiter, Willem H. & Sibert, Anne C., 2018. "The fallacy of the fiscal theory of the price level: One last time," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-56.
    11. Van Bon Nguyen, 2022. "Does governance matter for the public debt–inflation relationship in developed countries? Panel quantile regression approach," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(4), pages 1153-1173, December.
    12. Esat Durguti & Nexhat Kryeziu & Emine Gashi, 2020. "How Does the Budget Deficit Affect Inflation Rate-Evidence from Western Balkans," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 9(1), pages 01-10, January.
    13. Lawrence J. Christiano & Terry J. Fitzgerald, 2000. "Understanding the fiscal theory of the price level," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-38.
    14. Jukka Railavo, 2004. "Stability consequences of fiscal policy rules," Macroeconomics 0404020, University Library of Munich, Germany.
    15. António Afonso, 2002. "Disturbing the Fiscal Theory of the Price Level: Can it Fit the EU-15," Working Papers Department of Economics 2002/01, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    16. Jalil, Abdul & Tariq, Rabbia & Bibi, Nazia, 2014. "Fiscal deficit and inflation: New evidences from Pakistan using a bounds testing approach," Economic Modelling, Elsevier, vol. 37(C), pages 120-126.
    17. Kaan Masatci & Asuman Oktayer, 2022. "The Power of Linear Methods in Determining the Dominant Fiscal Regime: A Research on Turkiye," Journal of Economy Culture and Society, Istanbul University, Faculty of Economics, vol. 65(65), pages 375-394, June.
    18. Creel, Jerome & Bihan, Herve Le, 2006. "Using structural balance data to test the fiscal theory of the price level: Some international evidence," Journal of Macroeconomics, Elsevier, vol. 28(2), pages 338-360, June.
    19. Marco Bassetto, 2002. "A Game-Theoretic View of the Fiscal Theory of the Price Level," Econometrica, Econometric Society, vol. 70(6), pages 2167-2195, November.
    20. Lin, Hsin-Yi & Chu, Hao-Pang, 2013. "Are fiscal deficits inflationary?," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 214-233.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:oaefxx:v:9:y:2021:i:1:p:1921905. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/OAEF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.