Effect Of Macroeconomic Variables On The Nigerian Economic Growth

ABSTRACT

The aim of this paper is to examine the effect of macroeconomic variables which includes inflation rate, interest rate and exchange rate on economic growth of Nigeria. The data for the study were derived mainly from the secondary sources which includes; National Bureau of Statistics, Central Bank of Nigeria Bulletins, Bullions, research and statistics publication and economic report of various issues,the secondary data has been taken for 30 years from 1986 to 2016.Ordinary Least Square statistical technique was used to assess the degree of influence the variables have on each other.The results from ordinary least square (OLS) regression analysis describe that  inflation rate had positive and insignificant effect on economic growth. Interest rate had a negative and significant effect on economic growthwhile exchange rate had positive and significant effect on the economic growth. The empirical results derived indicate that all the variables of interest were stationary after their first differencing. The study found co integration relationship between real GDP per capita (economic growth) and its macroeconomic factors.  Based on the results and analysis it is suggested that The government should fashion out ways of maintaining the inflation rate at a threshold not exceeding 2-3 percent, Government should guard against increasing interest rate, More export-oriented policies should be pursued by the government while maintaining the floating exchange rate regime.

TABLE OF CONTENTS

PAGE

Title Page ﾿ i

Declaration ﾿ ii

Certification ﾿             iii

Dedication ﾿ iv

Acknowledgements ﾿             v

Table of Contents ﾿ vi

List of Tables ﾿             viii

Abstract ﾿ x

CHAPTER ONE: INTRODUCTION

1.1 Background to the Study ﾿             1

1.2 Statement of the Problem                                          ﾿             3

1.3 Objectives of the Study ﾿             5

1.4 Research Questions                                                                                                          5

1.5 Research Hypotheses ﾿             5

1.6 Significance of the Study ﾿             5

1.7 Scope of the Study ﾿ 6

1.8 Limitation of the Study                                                                                                     6

1.9 Definition of Terms                                                                                                          7

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1 Conceptual Framework                  ﾿             9

2.1.1 Concept of Macroeconomic Policy ﾿ 11

2.1.2. Macroeconomic Variable ﾿ 12

2.1.3 Inflation rate            ﾿ 16

2.1.4 Exchange Rate            ﾿ 19

2.1.5 Economic Growth                                        ﾿ 20

2.1.6 Interest Rate            ﾿ 22

2.1.7 Money supply                                    ﾿ 26

2.1.8 Foreign Direct Investment ﾿ 27

2.2 Theoretical Framework ﾿ 29

2.2.1 Optimal Currency area (OCA) Theory                        ﾿ 29

2.2.2 Purchasing Power Parity (PPP) Theory ﾿ 30

2.2.3 The Monetary Model of Exchange Rate          ﾿ 30

2.2.4 The portfolio Balance Approach                                                               31

2.2.5 Economic Growth Theory                                                                         31

2.2.6 Endogenous Growth Theory                                                                     33

2.3 Empirical Literature            ﾿ 34

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Research Design                                                                                           38

3.2 Area of the Study                                                                                         38

3.3 Nature and Sources of data                                                                          38

3.4 Methods of Data Analysis                                                                            39

3.5 Model Specification                                                                                     41

3.6 Description of Research Variables                                                               45

3.6.1 Dependent Variable (Criterion)                                                                 45 

3.6.2Explanatory or Independent Variable                                                         45 

CHAPTER FOUR: DATA PRESENTATION, DATA ANALYSIS AND DISCUSSION OF FINDINGS

4.1 Data Presentation                                                                                           47

4.1.1 Gross Domestic Product (GDP)                                                                 48 

4.1.2 Inflation Rate                                                                                              49 

4.1.3 Interest Rate                                                                                                49 

4.1.4 Exchange Rate                                                             50

 4.2 Data Analysis                                                                                                51 

4.3 Test of Hypotheses                                                         54

4.3.1 Hypotheses One                                                           54

4.3.2 Hypotheses Two                                                          54

4.3.3 Hypotheses Three                                                         54

4.4 Discussion of Findings                                                  55

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Findings                                                                                    57

5.2 Conclusion57

5.3 Recommendations 58

REFERENCES ﾿ 59

APPENDICES

Appendix A                                                                                                          

Appendix B