Application of Bootstrap Simulation and Asymmetric Causal Approach to Fiscal Deficit-Inflation Nexus

Olaniyi, Clement Olalekan

doi:10.1177/0974910120919021

Cited by 14 publications

(19 citation statements)

References 67 publications

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“…Empirically, plethora of studies has been conducted on the nexus between budget deficit and inflation with diverse outcomes (Kundrapam and Pattanaik, 2010;Cata˜o and Terrones, 2005;Lin and Chu, 2013;Mohanty and John, 2014;Jalil et al, 2014;Abu and Karim, 2015;Ishaq and Mohsin, 2015;Agoba et al, 2017;Ramu and Gayithri, 2017;Klein and Linnemann, 2020;Tiwari et al, 2015;Ahmad and Aworinde, 2019;Ssebulime and Edward, 2019;Ali andKhalid, 2019, Khan et al, 2020). In Nigeria, few studies have investigated the link between budget deficit and inflation (Olusoji and Oderinde, 2011;Awe and Olalere, 2012;Oseni and Sanni, 2016;Danlami et al, 2019;Apinran et al, 2019;Olaniyi, 2020;and Fasanya, Fajobi and Adetokunbo;2021). However, these studies considered linear or symmetric modelling of the…”

Section: Introductionmentioning

confidence: 99%

“…The asymmetry effect of budget deficit and inflation in Nigeria linkage between these variables and fail to consider the asymmetric role of budget imbalance on inflation which could lead to model mis-specification of the connection and invalid policy implication especially if the series exhibit nonlinear process. The closest to this is the studies of Abu and Karim (2015) and Olaniyi (2020). Nevertheless, the study of Olaniyi (2020) only considers the asymmetric causality between the two variables and causality result does not give the magnitude and influence of positive and negative changes of budget deficit on inflation and while the study of Abu and Karim (2015) consider nonlinearity between fiscal deficit and inflation in 51 African countries by taking square of fiscal deficit, rather than decomposing fiscal deficit into its positive and negative changes.…”

Section: Introductionmentioning

confidence: 99%

“…The closest to this is the studies of Abu and Karim (2015) and Olaniyi (2020). Nevertheless, the study of Olaniyi (2020) only considers the asymmetric causality between the two variables and causality result does not give the magnitude and influence of positive and negative changes of budget deficit on inflation and while the study of Abu and Karim (2015) consider nonlinearity between fiscal deficit and inflation in 51 African countries by taking square of fiscal deficit, rather than decomposing fiscal deficit into its positive and negative changes. In addition, any hypothetical deduction drawn from this panel study will only offer overall insight on the nexus between the variables while lacking comprehensive policy inferences for each country (Shahbaz, Hoang, Mahalik, Roubaud, 2017).…”

Section: Introductionmentioning

confidence: 99%

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The asymmetry effect of budget deficit and inflation in Nigeria

Garba

2023

JGEB

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This study evaluates the asymmetry effect of budget deficit and inflation in Nigeria spanning 1986 and 2020. The dissertation employed the Non-linear Autoregressive Distributed Lag (NARDL) approach of Shin, Yu and Greenwood-nimmo (2014) to examine the effect of budget deficit on inflation in Nigeria. The study employed annual data on budget deficit (proxied by budget deficit as a share of GDP), money supply (proxied by money supply), inflation (proxied by consumer price index) collected from Central Bank of Nigeria Statistical Bulletin, 2020 edition. The result of the effect of budget deficit on inflation indicates that in the long run, positive change in budget deficit induces inflation. This result indicates that rise in budget deficit is inflationary in Nigeria. Furthermore, the inflationary role of positive change in budget leads to higher price level. In addition, a negative change in budget deficit exerts an inflationary pressure in the long run though insignificant. Based on the findings of our analyses, the study concludes that budget deficit raises money supply and induces inflationary pressure in Nigeria. The study therefore recommends that there is need for the authorities in Nigeria should reduce the cost of governance by reducing overhead and allowance of political office holder in order to reduce budget deficit.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The asymmetry effect of budget deficit and inflation in Nigeria

Garba

2023

JGEB

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“…The threshold level of budget deficit and money supply that stabilize inflation in Nigeria economists argue that notably in the period of economic downturn, budget imbalance stimulate the aggregate demand to increase expeditious than aggregate supply thereby accelerate growth (Olaniyi, 2020). Contrarily, the monetarists assert that budget imbalance is detrimental to an economy (Oladipo & Akinbobola, 2011).…”

Section: Introductionmentioning

confidence: 99%

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confidence: 99%

The threshold level of budget deficit and money supply that stabilize inflation in Nigeria

Garba

2023

JGEB

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This study evaluates the threshold level of budget deficit and money supply that stabilize inflation in Nigeria spanning 1986 and 2020. The study aimed at determine the threshold level of budget deficit and money supply that stabilize inflation in Nigeria. In Addition, the study applied the Hansen threshold model (1998) to estimate the threshold level. The study employed annual data on budget deficit (proxied by budget deficit as a share of GDP), money supply (proxied by money supply), inflation (proxied by consumer price index) collected from Central Bank of Nigeria Statistical Bulletin, 2020 edition. Based on the findings of our analyses, the study concludes that budget deficit raises money supply and induces inflationary pressure in Nigeria. The study therefore recommends that there is need for the authorities in Nigeria should reduce the cost of governance by reducing overhead and allowance of political office holder in order to reduce budget deficit. The study therefore recommends that government must ensure that yearly budget imbalance does not exceed this threshold in order to mitigate deficit induce inflation. Also, there is the need for government to strengthening public financial management reforms (like Fiscal Responsibility Act, the Medium-Term Expenditure Framework). This will engender fiscal discipline and reduce fiscal deficit over time.

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