Interaction effect of fiscal and monetary policies on the level of inflation in Nigeria
Inflation, a persistent economic challenge in Nigeria, erodes purchasing power, distorts investment decisions, and exacerbates inequality. This research estimates the interaction effects of fiscal and monetary policies on inflation, focusing on the coordination challenges between these policy framew...
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Universidad Francisco de Paula Santander
2025
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| author | Oyasor, Emmanuel |
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| description | Inflation, a persistent economic challenge in Nigeria, erodes purchasing power, distorts investment decisions, and exacerbates inequality. This research estimates the interaction effects of fiscal and monetary policies on inflation, focusing on the coordination challenges between these policy frameworks. Using an ARDL model, the research incorporates key variables such as real GDP, total government expenditure, money supply, fiscal deficits and others. The findings reveal that interest rate and money supply significantly influence inflation, highlighting the dominant role of monetary policy. Conversely, fiscal spending shows no direct long-run impact on inflation, while fiscal deficits contribute to inflationary pressures. The coefficient of interaction between monetary and fiscal policies demonstrates a modest stabilizing effect, underscoring the need for coordinated policy efforts. The study identifies a lack of synchronization between fiscal and monetary policies as a critical factor exacerbating inflation volatility. Structural issues, such as exchange rate instability and the informal economy, further complicate inflation management. Recommendations include prioritizing money supply control, fostering fiscal-monetary coordination, and addressing the structural factors underlying inflation. This research provides actionable insights for policymakers to design sustainable strategies aimed at achieving macroeconomic stability and controlling inflation in Nigeria. |
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| spelling | oai:revistas.ufps.edu.co:article-49572025-09-10T15:25:41Z Interaction effect of fiscal and monetary policies on the level of inflation in Nigeria Efecto de la interacción de las políticas fiscales y monetarias sobre el nivel de inflación en Nigeria Oyasor, Emmanuel Política fiscal política monetaria inflación Fiscal Policy Monetary Policy Inflation Inflation, a persistent economic challenge in Nigeria, erodes purchasing power, distorts investment decisions, and exacerbates inequality. This research estimates the interaction effects of fiscal and monetary policies on inflation, focusing on the coordination challenges between these policy frameworks. Using an ARDL model, the research incorporates key variables such as real GDP, total government expenditure, money supply, fiscal deficits and others. The findings reveal that interest rate and money supply significantly influence inflation, highlighting the dominant role of monetary policy. Conversely, fiscal spending shows no direct long-run impact on inflation, while fiscal deficits contribute to inflationary pressures. The coefficient of interaction between monetary and fiscal policies demonstrates a modest stabilizing effect, underscoring the need for coordinated policy efforts. The study identifies a lack of synchronization between fiscal and monetary policies as a critical factor exacerbating inflation volatility. Structural issues, such as exchange rate instability and the informal economy, further complicate inflation management. Recommendations include prioritizing money supply control, fostering fiscal-monetary coordination, and addressing the structural factors underlying inflation. This research provides actionable insights for policymakers to design sustainable strategies aimed at achieving macroeconomic stability and controlling inflation in Nigeria. La inflación, un desafío económico persistente en Nigeria, erosiona el poder adquisitivo, distorsiona las decisiones de inversión y exacerba la desigualdad. Esta investigación estima los efectos de interacción de las políticas fiscales y monetarias sobre la inflación, centrándose en los retos de coordinación entre estos marcos políticos. El estudio consideró datos secundarios para un período de 36 años, que abarca desde 1986 hasta 2021. Utilizando un modelo ARDL, la investigación incorpora variables clave como el PIB real, el gasto público total, la oferta monetaria, los déficits fiscales y otras. Los resultados revelan que los tipos de interés y la oferta monetaria influyen significativamente en la inflación, lo que pone de relieve el papel dominante de la política monetaria. Por el contrario, el gasto fiscal no muestra un impacto directo a largo plazo sobre la inflación, mientras que los déficits fiscales contribuyen a las presiones inflacionistas. El coeficiente de interacción entre las políticas monetarias y fiscales muestra un modesto efecto estabilizador, lo que subraya la necesidad de coordinar los esfuerzos políticos. El estudio identifica la falta de sincronización entre las políticas fiscales y monetarias como un factor crítico que exacerba la volatilidad de la inflación. Cuestiones estructurales, como la inestabilidad del tipo de cambio y la economía informal, complican aún más la gestión de la inflación. Las recomendaciones incluyen dar prioridad al control de la oferta monetaria, fomentar la coordinación fiscal-monetaria y abordar los factores estructurales que subyacen a la inflación. Esta investigación proporciona información útil para que los responsables políticos diseñen estrategias sostenibles destinadas a lograr la estabilidad macroeconómica y controlar la inflación en Nigeria. Universidad Francisco de Paula Santander 2025-07-01 info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion application/pdf text/html text/xml https://revistas.ufps.edu.co/index.php/profundidad/article/view/4957 10.22463/24221783.4957 Revista Científica Profundidad Construyendo Futuro; Vol. 22 No. 22 (2025): Enero-Junio; 268-282 Revista Científica Profundidad Construyendo Futuro; Vol. 22 Núm. 22 (2025): Enero-Junio; 268-282 2422-2518 eng spa https://revistas.ufps.edu.co/index.php/profundidad/article/view/4957/6279 https://revistas.ufps.edu.co/index.php/profundidad/article/view/4957/6281 https://revistas.ufps.edu.co/index.php/profundidad/article/view/4957/6356 /*ref*/Abanikanda, E. O., & Dada, J. T. (2024). External shocks and macroeconomic volatility in Nigeria: does financial development moderate the effect?. PSU Research Review, 8(3), 828-844. /*ref*/Abdalhafez, I. (2021). 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Derechos de autor 2025 Universidad Francisco de Paula Santander https://creativecommons.org/licenses/by-nc/4.0 |
| spellingShingle | Política fiscal política monetaria inflación Fiscal Policy Monetary Policy Inflation Oyasor, Emmanuel Interaction effect of fiscal and monetary policies on the level of inflation in Nigeria |
| title | Interaction effect of fiscal and monetary policies on the level of inflation in Nigeria |
| title_alt | Efecto de la interacción de las políticas fiscales y monetarias sobre el nivel de inflación en Nigeria |
| title_full | Interaction effect of fiscal and monetary policies on the level of inflation in Nigeria |
| title_fullStr | Interaction effect of fiscal and monetary policies on the level of inflation in Nigeria |
| title_full_unstemmed | Interaction effect of fiscal and monetary policies on the level of inflation in Nigeria |
| title_short | Interaction effect of fiscal and monetary policies on the level of inflation in Nigeria |
| title_sort | interaction effect of fiscal and monetary policies on the level of inflation in nigeria |
| topic | Política fiscal política monetaria inflación Fiscal Policy Monetary Policy Inflation |
| topic_facet | Política fiscal política monetaria inflación Fiscal Policy Monetary Policy Inflation |
| url | https://revistas.ufps.edu.co/index.php/profundidad/article/view/4957 |
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