DEFICIT FINANCING AND MACROECONOMIC PERFORMANCE: THE NIGERIA EXPERIENCE

Tosan Jakpa and Olubomi Osho-Itsueli
Keywords: Macro economy, deficit financing, Nigeria
Journal of Inter-Disciplinary Studies on Contemporary Issues 2020 6(2), 1-14. Published: March 11, 2023


Abstract

The study investigates the relationship between deficit financing and the performance of the macro economy proxy by GDP in Nigeria for a period of thirty years from 1990 to 2019 using the ARDL model due to the mixed order of integration. Deficit financing was proxied by domestic money supply, government fiscal deficit, and inflation rate as control variable in the model. And the result shows that the model met the necessary condition of stability but fail the sufficient condition with an explosive divergence indicator. Also, there is long run relationship between the variables, and from the estimates of the long run equation, all the variables having a significant effect on the economy with domestic money supply inducing positive impact while inflation and government fiscal deficit having a negative. The study concludes that deficit financing has no immediate impact on the economy, but long-term effects.