Policy asymmetries and fiscal sustainability: evidence from Nigeria

Abstract

PurposeThis study examines and compares different specifications of the fiscal policy rule in the fiscal sustainability analysis of Nigeria.Design/methodology/approachThis is methodologically achieved by estimating the baseline constant-parameter and Markov regime switching fiscal models. The asymmetric autoregressive distributed lag fiscal model is also employed to substantiate the differential responses of fiscal authorities to public debt.FindingsThe baseline constant-parameter fiscal model provides mixed results of sustainable and unsustainable fiscal policy. The inconclusiveness is adduced to instability in primary fiscal balance–public debt dynamics. This makes it necessary to capture regime switches in the fiscal policy rule. The Markov switching estimations show a protracted fiscal unsustainable regime that is inconsistent with the intertemporal budget constraint (IBC). The no-Ponzi game and debt stabilizing results of the Markov switching fiscal model further revealed that the transversality and debt stability conditions were not satisfied. Additional findings from the asymmetric autoregressive model estimation show that fiscal consolidation responses vary with contraction and expansion in output and spending, coupled with downturns and upturns in public debt dynamics in both the long and short run. These findings thus confirm the presence of asymmetries in the fiscal policy authorities' reactions to public debt. Further, additional evidences show the violation of the IBC which is exacerbated by the deleterious effect of the pro-cyclical fiscal policy response in boom on the improvement of the primary fiscal balance.Originality/valueThis study deviates from the extant literature by accommodating time variation, periodic switches and fiscal policy asymmetries in the fiscal sustainability analysis of Nigeria.

Revisiting the oil prices–domestic food inflation nexus in Nigeria: the role of global geopolitical risk

“…Positive oil price shocks may spur white elephant projects that are not productive and cause inflationary pressures. It may be difficult to cut spending during AJEMS 14,4 periods of falling oil prices, leading fiscal authorities to finance budgets via borrowing; posing debt unsustainability (Moshiri, 2015;Adeosun et al, 2021b).…”

“…This makes it crucial for policymakers to consider geopolitical risks in their decision-making regarding price and food inflation targeting. Price instability raises risk premia in interest rates, the cost of doing business, and causes investment and output to dwindle, which can have adverse effects on economic growth (Adeosun et al ., 2021a, b, c). In oil-dependent and developing economies where a substantial proportion of total consumption is characterized by food products, oscillatory oil prices resulting in food inflation can pose challenges to the conduct of monetary policy.…”

SWOT Analysis with Novel NimbusTech Cloud Computing based Research on Regional Tourism Poverty Alleviation Development Model

“…The researchers suggested that microfinance institutions should provide financial education and training to local entrepreneurs to manage the finances effectively and make informed business decisions. In [19] In [20] conducted a study in Nigeria to evaluated microfinance towards poverty alleviation and economic growth in rural areas. The study found that microfinance institutions can help to reduce poverty and promote economic growth by providing financial support to small businesses engaged in tourism-related activities.…”

Investment and inclusive growth in sub-Saharan Africa

“…Despite the increasing significance of the SSA's investment potential, domesticinvestments in key sectors remain below capacity in augmenting capital and labor inputs and in attaining these aforementioned milestones. The region faces huge investment financing gaps, investment generation efficiency constraints coupled with debt accumulation without a commensurate improvement in investment (Kodongo and Ojah, 2016;Adeosun et al, 2020Adeosun et al, , 2021. With unresolved fiscal issues, empirical research into the effectiveness of domesticinvestment towards inclusive growth is critical.…”