TITLE:
Impact of Selected Macroeconomic Variables on Economic Growth in Nigeria
AUTHORS:
Olajide S. Oladipo, Nuhu Ado, Fausat M. Alesinloye, Wasiu A. Yusuf
KEYWORDS:
Economic Growth, Exchange Rate, Inflation Rate, Interest Rate, ARDL Model, Cointegration Analysis
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.12 No.11,
November
15,
2024
ABSTRACT: This study investigates the impact of selected macroeconomic variables on economic growth in Nigeria using quarterly data spanning from 2000Q1 to 2022Q3. The methodology, anchored in the co-integrated Autoregressive Distributed Lag (ARDL) model, emphasizes data collection, validity, and reliability considerations. Secondary data, drawn from the Central Bank of Nigeria and National Bureau of Statistics, constitute a sample of 87 data points, meeting the Central Limit Theorem’s sample size requirements. The variables under scrutiny nominal GDP growth (as a proxy for economic growth), exchange rate (EXR), inflation rate (INF), and interest rate (INT) demonstrate distinct relationships established through rigorous statistical analysis. Validity and reliability assessments employing a 95% confidence level ascertain the credibility of the study’s results. Stationarity tests utilizing Augmented Dickey-Fuller (ADF) and Philips- Perron Unit Root Tests reveal a mix of integration orders among the variables, guiding the choice of ARDL modeling to capture long-run relationships. Descriptive statistics illustrate variable behaviors, exhibiting fluctuations and key trends over time. Correlation analysis corroborates certain expected relationships while uncovering unexpected associations among the variables. The ARDL bounds test for co-integration confirms a long-run equilibrium relationship among the variables, enabling the estimation of long-run coefficients. Findings reveal that while inflation and interest rates seemingly bolster economic growth in theory, their impact remains statistically insignificant in both the short and long runs. Conversely, exchange rate fluctuations exhibit a significant negative impact on economic growth in both periods. Short-run analyses reveal exchange rate depreciation’s detrimental effects on economic growth, aligning with theoretical expectations. However, unexpected positive correlations emerge between inflation and economic growth, challenging conventional assumptions. Robustness checks confirm model stability, normality, lack of heteroscedasticity, and absence of serial correlation, bolstering the reliability of the estimated relationships. Overall, this study underscores the complex interplay of macroeconomic factors on economic growth in Nigeria, revealing nuanced dynamics beyond anticipated theoretical linkages.