Effect of Fiscal Policy on Sectoral Output Growth in Nigeria

Abstract

This study broadly examined the effect of fiscal policy on sectoral output growth in Nigeria for the period of 1970-2013. The study employed an Autoregressive Distributed lag (ARDL) and Error Correction Model (ECM). The results showed that total fiscal expenditure (TEXP) have positively contributed to all the sectors output with an exception of agriculture sector. The findings established that manufacturing sector has a positive relationship with all the determinant variables, while inflation rate has negatively impacted output growth of the various sectors with an exception of manufacturing sector. The study concluded that the existence of disparity in the sectoral response to fiscal policy variables underscored the difficulty of conducting uniform and economic wide fiscal policy in Nigeria. Therefore, the best policy approach is to adopt sector specific policy based on their relative strength and significance in each sector of the economy within the overall fiscal policy mechanism framework.