Abstract

This paper examined the dynamic interaction among business cycle macroeconomic variables and economic growth in Nigeria between 1986 and 2014 The paper employed the vector autoregression technique VAR with a view to investigate the effect of business cycle on economic growth and its interaction with government expenditure and money supply in Nigeria during the study period Quarterly time series data between 1986 and 2014 is used for the study Data on real gross domestic product RGDP nominal gross domestic product NGDP broad money supply M2 and government expenditure gexp were sourced from the Central Bank of Nigeria CBN Statistical Bulletin The Impulse Response and Variance Decomposition analysis from the VAR model showed that there is a dynamic relationship among business cycle macroeconomic variables and economic growth in Nigeria i e shocks to any of the variables affected all other variables used in the study Particularly business cycle affects growth and the performance of macroeconomic variables in the study period although its effect lacked persistence throughout the study period Therefore the paper concludes that business cycle and growth affects each other as against the view of earlier macroeconomists who posits that they are unrelated Thus the paper proffers the use of stabilization policies for macroeconomic variables as well as ensuring that the effect of business cycle is not trivialized in Nigeria