Behavioral Pattern of Fiscal Policy Variables and Effects on Economic Growth: An Econometric Exposition on Nigeria

The rationale of this study is to examine the effect of fiscal policy variables on economic growth in Nigeria. The fiscal policy variables considered in the study include government gross fixed capital formation, tax, government expenditure, budget deficit as well as external debt. The study covered the period 1986 to 2012. Unit roots of the time series were examined using the Augmented Dickey-Fuller technique after which the co-integration test was conducted using the Johansen Co-integration Approach. Error-correction models were estimated to take care of short-run dynamics. Over all, the results indicate that fiscal policy has a long-run relationship with Nigeria economic growth confirmed by the co-integration test. the study further reveals that government expenditure and gross fixed capital formation from government has positive and significant impact on Nigeria economic growth while budget deficit has negative and significant effect on Nigeria economic growth and concluded that that fiscal policy has the ability to induced economic growth in Nigeria through government expenditure and investment in the economy while ensuring that fiscal discipline are practised by keeping to budgetary provisions and minimising budget deficit.