ASYMMETRIC EFFECTS OF FISCAL POLICY ON ECONOMIC DEVELOPMENT IN NIGERIA

Abstract

The feasibility of fiscal policy in achieving economic stabilization is really a contending issue. The debate on the most suitable fiscal instrument for controlling the economy in the face of globalization has been dominated by various schools of thought. The paper investigates the asymmetric effects of fiscal policy instruments on economic development in Nigeria between 1981 and 2022. Annual secondary data on poverty rate, unemployment rate, real interest rate, human development index (HDI), debt-to- GDP ratio, revenue as a percentage of GDP, expenditure as a percentage of GDP, inflation rate and population rate of Nigeria were used. Data sourced from the World Development Indicators (WDI, 2023); International Monetary Fund (IMF, 2023), United Nations Development Programme (UNDP, 2023) and World Bank Group, (2023) were analysed using a Non-linear ARDL (NARDL) technique. The findings of the study reveal that shocks to government expenditure, revenue and debt have significant non-linear impacts on unemployment rate, poverty rate and HDI in Nigeria. It is therefore concluded that fiscal policy instruments confer significant asymmetric effects on economic development in Nigeria. Also, it is recommended that policymakers should adopt expansionary fiscal policy during economic downturns to sustain low unemployment and poverty rates as well as low HDI.