Business Cycle, Macroeconomic Variables and Economic Growth in Nigeria (1986-2014); A Time Series Econometric Approach

Abstract

This paper examined the dynamic interaction among business cycle, macroeconomic variables and economic growth in Nigeria between 1986 and 2014. The study employed the vector auto regression technique (VAR) to investigate the business cycle effect 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 was used for the study. Data on the real gross domestic product (RGDP), nominal gross domestic product (NGDP), broad money supply (M2) and government expenditure was 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. Business cycle affected growth and the performance of macroeconomic variables in the study period although its effect lacked persistence throughout the study period.