Keywords
Federal Government Total Debt
Exchange Rate
Inflation
Article Number
050Abstract
This study examines the effect of fiscal policies on inflation in Nigeria, while the specific objectives are to examine: (a) the effect of Federal Government Total Expenditure (FGTE) on inflation, (b) the influence of Total Government Debt (FGTD) on inflationary trends, and (c) the combined impact of exchange rate (EXR) fluctuations and fiscal variables on inflation. The study utilized secondary data from 1986 to 2024, sourced from the World Bank development indicators, CBN statistical bulletins, and the Bureau of Statistics, and analyzed with E-view software. The Error Correction Model (ECM) was the primary analytical tool used to explore both long-run and short-run dynamics through the vector error correction model (VECM). The study identified Inflation (INF) as the most stable variable, while Government Expenditure (FGTE) shows the highest volatility. Also, there is a significant and statistically reliable long-term relationship between fiscal policy (expenditure and debt) and inflation. This study will be felt by financial stakeholders, including the Government, deposit banks and the CBN, which will use its findings to improve fiscal policies against inflation, price stabilization, and for researchers in the finance field.References
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