•  
  •  
 

Economic and Financial Review

Keywords

Fiscal Multipliers, Government Spending, Tax, Structural Vector Autoregression, Employment, Income distribution, Revenue

Abstract

Fiscal multipliers are important tools for macroeconomic projections and policy design. However, very little is known about the size in developing countries, given the complexity of their estimation. The unavailability of reliable high frequency data and structural characteristics of these countries also make the estimation of fiscal multipliers difficult, in such countries. This paper estimated fiscal multipliers associated with government spending and tax-related revenue for Nigeria using quarterly data, spanning 1985: Q1 to 2015 Q4. The structural vector autoregression (SVAR) methodology suggested by Blanchard and Perotti (2002) was utilised in the model. The SVAR framework applied followed the approach by Favero and Giavazzi (2007) to augment for a feedback mechanism, arising from the level of debt, especially given Nigeria’s rising debt level. The results showed that government spending multiplier for Nigeria was high, at 0.47 on impact and at 0.35 within a quarter. Similarly, the tax revenue multiplier was equally high at 0.67 on impact and 0.33 within a quarter. This result suggested that reform programmes, aimed at rejuvenating the economy should consider the impact of these multipliers in assessing expenditure requirements and tax plans that would achieve government objectives over the programme period.

Issue

2

Volume

57

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.