MACROECONOMIC EFFECT OF MONETARY AND FISCAL POLICY COORDINATION ON ECONOMIC GROWTH IN NIGERIA

Abstract

In many countries, the crucial aims of macroeconomic policy are full employment, balance of payment equilibrium, price stability and sustainable economic growth of the population which can improve the quality of life. Fiscal and monetary authorities interact and coordinate in the designing and implementation of macroeconomic policies to facilitate joint decisions on issues in the economy. From the CBN Statistical Bulletin, a times series data were used to study the effects of monetary and fiscal policy coordination on economic growth in Nigeria from 1985 to 2021. The multiple regression analysis result revealed that the money supply (MS), government expenditure (GOVTEXP), government revenue (GOVTREV), inflation (INFL), and exchange rate (EXR) had a statistically insignificant and positive effect on Nigeria's economic growth. The only variable with a statistically significant impact on economic growth was monetary policy rate (MPR); additionally, coordination between fiscal and monetary policy had a substantial impact on economic growth in Nigeria. The study suggested that in order to achieve coordination between fiscal and monetary authorities, binding rules and procedures should be established.