Optimal Policy Mix for Inclusive Growth: Evidence from Nigeria

Okafor, S.O; Maduka, O.D; Ike, A.N; Ahamba, K.O; Okoro, D.C; Onoja, J.E. (2019). Optimal policy mix for inclusive growth: Evidence from Nigeria. Journal of Economics, Management and Trade. 22(1):1-19.

24 Pages Posted: 10 Jan 2019

See all articles by Samuel Okafor

Samuel Okafor

Nnamdi Azikiwe University - Department of Economics

Olisaemeka Maduka

Nnamdi Azikiwe University - Department of Economics

Ann Ike

Federal Polytechnic, Nigeria

Kenneth Ahamba

Federal University Ndufu-Alike, Ikwo - Department of Economics

Daniel Okoro

Alvan Ikoku Federal College of Education - Department of Economics

Joan Onoja

College of Education (Nigeria)

Date Written: December 6, 2018

Abstract

Unresolved issues on choice of optimal policy mix for inclusive growth pose intractable problems to policy-makers. Search for solution has continued in the present study which focused on extracting common or specific factor with proper combination of fiscal and monetary measures that could foster inclusive growth. Study spanned across 1980-2016. Data were sourced from Central Bank of Nigeria, National Bureau of Statistics, Abuja and World Development Indicators. Exploratory factor analysis technique was used to analyze the data. Results indicate that: (1) Optimal policy mix, compatible with inclusive growth, is expansionary fiscal-expansionary money, which blended company income tax, recurrent expenditure, money supply, domestic debt, credit to private sector, custom and exercise duties, net loans and advances, exchange rate, federally collected revenue, capital expenditure and petroleum profit tax in exact proportion of their respective regression weights (2) Decelerator policy mix undermined the effectiveness of optimal policy mix (3) Rising demand for money induced external borrowing which failed to impact significantly on growth. Study concluded that the determination of optimal policy mix that fosters inclusive growth justifies Keynes’s MEC theory as valid theoretical framework for the study. It was recommended, inter alia, that Macroeconomic Policy Committees be domiciled in finance ministries for effective co-ordination of fiscal and monetary policies.

Keywords: fiscal policy; monetary policy; expansionary fiscal; expansionary money; decelerator

JEL Classification: E52, E62, E63

Suggested Citation

Okafor, Samuel and Maduka, Olisaemeka and Ike, Ann and Ahamba, Kenneth and Okoro, Daniel and Onoja, Joan, Optimal Policy Mix for Inclusive Growth: Evidence from Nigeria (December 6, 2018). Okafor, S.O; Maduka, O.D; Ike, A.N; Ahamba, K.O; Okoro, D.C; Onoja, J.E. (2019). Optimal policy mix for inclusive growth: Evidence from Nigeria. Journal of Economics, Management and Trade. 22(1):1-19.. Available at SSRN: https://ssrn.com/abstract=3307976

Samuel Okafor (Contact Author)

Nnamdi Azikiwe University - Department of Economics ( email )

Enugu-Onitsha Expressway
Nnamdi Azikiwe University
Awka, Anambra
Nigeria

Olisaemeka Maduka

Nnamdi Azikiwe University - Department of Economics

Enugu-Onitsha Expressway
Nnamdi Azikiwe University
Awka, Anambra
Nigeria

Ann Ike

Federal Polytechnic, Nigeria

PMB 231
Osun State
Nigeria

Kenneth Ahamba

Federal University Ndufu-Alike, Ikwo - Department of Economics ( email )

Ikwo
Nigeria

Daniel Okoro

Alvan Ikoku Federal College of Education - Department of Economics ( email )

Owerri
Nigeria

Joan Onoja

College of Education (Nigeria) ( email )

Oju, Benue 234
Nigeria

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