Relative Effectiveness of Fiscal and Monetary Policies in Nigeria

Abstract

This study employs the auto regressive distributed lag (ARDL) model to ascertain the relative effectiveness of monetary and fiscal policies in Nigeria using a quarterly time-series from 1981-2012. From our analysis, it discovered that monetary and fiscal policies both have significant positive impact income. This conforms to a priori expectation and we discovered that monetary policy effects income faster than fiscal policy. In the short run, monetary policy effects income more than fiscal policy but the reverse is the case for the long run. Total impact of fiscal policy is higher than that of monetary policy. This study supports the use of both policies to achieve change in income but this depends on the objective the authorities want to achieve.