Social and Behavioral Sciences Commons^™

Does Government Spending Undermine Monetary Policy In Nigeria?, Emmanuel T. Adamgbe, Peter D. Golit, Izuchukwu I. Okafor

Economic and Financial Review

In Nigeria, anecdotal evidence suggest that the fiscal/operations of government, especially disbursements from the Federation Account to the three-tiers of government, had over the years created liquidity challenges requiring aggressive monetary management. Against the background, this paper addresses two questions: (i) Does government spending have significant spill-over effects on inflation in Nigeria? (ii) Does government, spending induce a concomitant response by the CBN? ln addition, unlike the sparse literature in Nigeria on these two issues, which essentially relies on constant parameter model we use of time-varying parameter vector autoregressive (TVP-VAR) model with stochastic volatility. Applying this framework allows us not …