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Output Volatility and Government Size in Nigeria

Author

Listed:
  • Nwosa Philip I.

    (Department of Economics, Faculty of Social Sciences, Federal University Oye-Ekiti, Nigeria)

  • Ehinomen Chris

    (Department of Economics, Faculty of Social Sciences, Federal University Oye-Ekiti, Nigeria)

  • Ugwu Ephraim

    (Department of Economics, Faculty of Social Sciences, Federal University Oye-Ekiti, Nigeria)

Abstract

Research background: Output volatility has potentially adverse consequences on the economy and the stabilizing role of fiscal policy is linked to the share of government size in an economy. Hence, given the relative large share of government in developing countries, government size is expected to play an important role in stabilizing output volatility.Purpose: This study examines the relationship between output volatility and government size in Nigeria. The study seeks to establish if government size mitigates output volatility in Nigeria.Research methodology: The study employs the Autoregressive Distributed Lag (ARDL) technique after conducting stationarity and co-integration tests.Results: The results of the ARDL estimate showed that government size lessens output volatility but the magnitude was insignificant. Further, the study found that volatility in aggregate government spending; international oil price and public debt were significant determinants of output volatility in Nigeria.Novelty: This showed that the automatic stabilization role of government size on output volatility could not be established. The automatic stabilization role of fiscal policy can be improved by increasing social security transfers (pension payment), payments of unemployment benefits and increasing civil servants minimum wage.

Suggested Citation

  • Nwosa Philip I. & Ehinomen Chris & Ugwu Ephraim, 2020. "Output Volatility and Government Size in Nigeria," Folia Oeconomica Stetinensia, Sciendo, vol. 20(1), pages 286-301, June.
    • Handle: RePEc:vrs:foeste:v:20:y:2020:i:1:p:286-301:n:17
    DOI: 10.2478/foli-2020-0017
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    References listed on IDEAS

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    More about this item

    Keywords

    Output Volatility; Government Size; Auto-regressive distributed lag; Nigeria;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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