Threshold Analysis of Fiscal Deficits with Respect to Monetary Growth: Evidence from Nigeria

Abstract

This paper aims at determining the threshold level of fiscal deficits with regards to monetary growth. Data for the study are obtained from Central Bank of Nigeria Statistical publication between 1986 and 2016. The empirical findings suggest that optimal level of fiscal deficits with regards to monetary growth is at the point where the fiscal deficits, as a percentage of GDP is 31. The major conclusion from the study is that continuous accumulation of deficits in the economy by the government should be avoided. This can be done by strengthen fiscal consolidaton and provision of viable institutional fiscal rules so as not reach the threshold level.

Keywords

• Threshold
• Deficits
• Monetary Base