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Article
Publication date: 6 April 2021

Opeoluwa Adeniyi Adeosun, Olumide Steven Ayodele and Olajide Clement Jongbo

This study examines and compares different specifications of the fiscal policy rule in the fiscal sustainability analysis of Nigeria.

Abstract

Purpose

This study examines and compares different specifications of the fiscal policy rule in the fiscal sustainability analysis of Nigeria.

Design/methodology/approach

This 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.

Findings

The 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/value

This study deviates from the extant literature by accommodating time variation, periodic switches and fiscal policy asymmetries in the fiscal sustainability analysis of Nigeria.

Details

African Journal of Economic and Management Studies, vol. 12 no. 2
Type: Research Article
ISSN: 2040-0705

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Article
Publication date: 29 October 2020

Opeoluwa Adeniyi Adeosun, Philip Akanni Olomola, Adebayo Adedokun and Olumide Steven Ayodele

The increasing debate on the viability of broad-based productive employment in stimulating the participatory tendencies of growth makes it instructive to inquire how the…

Abstract

Purpose

The increasing debate on the viability of broad-based productive employment in stimulating the participatory tendencies of growth makes it instructive to inquire how the African “Big Five” have fared in their quests to ensure growth inclusiveness through public investment-led fiscal policy.

Design/methodology/approach

Time varying structures and nonlinearities in the government investment series are captured through the non-linear autoregressive distributed lag, asymmetric impulse responses and variance decomposition estimation techniques.

Findings

Study findings show that positive investment shocks stimulate growth inclusiveness by enabling access to opportunities through job creation and productive employment for the populace; this result is evident for Morocco and Algeria. However, there is a non-negligible evidence that shocks due to decline in the government investment manifest in insufficient capital stocks and limited investment opportunities, impede access to opportunities by the populace, hinder labour employability and make growth less inclusive. Furthermore, all short-run findings corroborate long-run results regarding the reaction of inclusive growth to positive investment shocks with the exclusion of South Africa; which, unlike its long-run finding, shows that shocks due to increases in investment can foster growth inclusiveness. Also, in respect to short-run negative investment shocks, Nigeria is the only country that does not align its long-run findings.

Practical implications

That public investment shocks make or mar inclusive growth effectiveness shows the need for appropriate fiscal policy consolidation and automatic stabilization guidelines to ensure buffers against shocks and to enhance government investment generation efficiency for a sustainable inclusive growth process that is more participatory in Africa.

Originality/value

This study is the first to accommodate possibilities of shocks in the inclusivity of growth analysis for the five biggest African economies which jointly account for over half of the recorded growth in the continent. As such, there is quantitative evidence that government investment is a potent determinant of growth inclusiveness and it is susceptible to structural changes and time variation of shocks.

Details

International Journal of Social Economics, vol. 47 no. 12
Type: Research Article
ISSN: 0306-8293

Keywords

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Article
Publication date: 31 July 2020

Opeoluwa Adeniyi Adeosun, Olaolu Richard Olayeni and Olumide Steven Ayodele

This paper aims to examine the transmission from oil price to local food price returns in Nigeria from January 1995 to May 2019.

Abstract

Purpose

This paper aims to examine the transmission from oil price to local food price returns in Nigeria from January 1995 to May 2019.

Design/methodology/approach

To circumvent erratic behaviours and account for possibilities of noises at the edge of the wavelet signals, the paper combines wavelet and Markov-switching techniques to determine the significance and magnitude of oil–food price dynamics across different time scales.

Findings

It is shown that oil to food price pass-through changed across frequencies. Notably, results reveal a swift pass-through which signals the dominance of the direct effect of oil price shocks on food prices with evidence of weak spillover in the short term. The medium- and long-term horizons witness the dominance of the indirect effect of oil price shocks with much sluggish transmission to food prices; the highest significant pass-through of about 4% are also observed when the oil price is denominated in the naira–USD exchange rate.

Originality/value

The study improves understanding of the relationship between oil price shocks and domestic food price returns. It shapes policy prescription on appropriate inflation targeting strategies of monetary authorities.

Details

International Journal of Energy Sector Management, vol. 15 no. 1
Type: Research Article
ISSN: 1750-6220

Keywords

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