An assessment of alternative fiscal stimulus instruments in Nigeria: A DSGE analysis
- 1Department of Entrepreneurship, SICHST, Makarfi, Nigeria
- 2Department of Economics and Development Studies, Federal University, Dutsin-Ma, Nigeria
Int. Res. J. Social Sci., Volume 8, Issue (2), Pages 13-19, April,14 (2019)
This paper sets out to ascertain the optimal fiscal stimulus instrument in Nigeria, based on its fiscal multiplier effect on key macroeconomic variables. This is done using a calibrated small open-economy New Keynesian DSGE model of the Nigerian economy augmented by rich fiscal sector incorporating government expenditure. Within this framework, the multiplier effects of three alternative fiscal stimulus instruments in the form of Government transfers, Government consumption expenditure, and Government investment are analysed. The main findings of this paper are; within the short-term period, government transfer shock is found to be more effective in stimulating the economy while, government investment shock has a larger impact in the long term. Therefore, the result suggests that the fiscal authority should spell out its priority clearly before selecting any fiscal instrument.
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