ABSTRACT
The study evaluated the impact of monetary and fiscal policy on unemployment using time series from 1992 to 2016. Monetary policy rate, money supply and government expenditure were the monetary and fiscal policies variables included in the model. The data was analyzed with the aid of regression analysis. The results showed that government expenditures and money supply were significant while monetary policy was not significant. Hence, it was recommended that the government of Nigeria need to make deliberate efforts to expand its expenditure by increasing its financial grants to unemployed youths in the country for productive ventures.
TABLE OF CONTENTS
Title
Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Table
of Contents vi
Lists
of Tables vii
Abstract viii
CHAPTER ONE
1.0
Introduction 1
1.1 Background
of the Study 1
1.2 Statement
of the Problem 2
1.3 Objectives
of the Study 4
1.4 Research
Questions 4
1.5 Research
Hypotheses 4
1.6 Significance of the study 5
1.7 Scope
of the Study 5
1.8 Limitation of the Study 6
1.9 Definition of Terms 6
CHAPTER TWO
2.0 Review
of Related Literature 7
2.1 Conceptual Framework 7
2.1.1 Concept of Fiscal Policy 7
2.1.2 The Difference between Fiscal and Monetary Policy 9
2.1.3 The
Role of Fiscal and Monetary Policy in the Stabilization of the Economic Cycle11
2.1.4 The
Relation between Fiscal and Monetary Policy 13
2.1.5 Monetary Policy 15
2.1.6 Objectives of Monetary Policy 16
2.1.7 The Instruments of Monetary Policy 17
2.1.8 Challenges of Monetary Policy
18
2.1.9 Effectiveness and Growing Importance of Monetary Policy 18
2.1.10 Types of Fiscal Policy 20
2.1.11 Instruments of Fiscal Policy
21
2.1.12 Fiscal
and Monetary Policy and Unemployment in Nigeria 22
2.1.13 Fiscal and Monetary Policies in Nigeria 23
2.2 Theoretical Framework 25
2.2.1 Keynesian Theory of Monetary Policy 25
2.2.2 The Macroeconomic Theory of Fiscal Policy 25
2.3 Empirical Review 27
CHAPTER THREE
3.0 Research Methodology 32
3.1 Research Design 32
3.2 Area
of the Study 32
3.3 Sources of Data 32
3.4 Population
of the Study 32
3.5 Model Specification 32
3.5.1 Description of Variables 34
3.6 Analytical Techniques 34
CHAPTER
FOUR
4.0 Presentation
of Data, Analysis and Discussion 36
4.1
Presentation of Data 37
4.2
Descriptive Analysis 37
4.3.1 Hypothesis testing 38
4.3.2 Discussion of Findings 39
CHAPTER
FIVE
Summary of
Findings, Conclusion and Recommendations 40
5.1
Summary of Findings 40
5.2
Conclusion 40
5.3
Recommendations 40
References 43
Appendix 48
LIST OF TABLES
Table
4.1: Aggregate dataset used for the study 36
Table 4.2: Summary of descriptive
statistic 37
Table 4.3: Regression Analysis (Dependent
variable, RGDP) 37
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Fiscal
and Monetary policy are key economic driven policies that sharpens the
macroeconomic factors in the nation.
Monetary policy rests on the relationship between the price at which
money can be borrowed and the total supply of money in the economy. It is generally referred to as being
expansionary or contractionary, where an expansionary policy increases the
total supply of money in the economy rapidly, and contractionary policy
decreases the total money supply, or increases it slowly. When a central bank
embarks on an expansionary monetary policy, it does so to stimulate domestic
economy and reduce unemployment, while contractionary policy involves raising
interest rates to combat inflation (Innocent, 2014). According to Ewubare &
Obayori (2015), expansionary or contractionary policy do have a substantial
influence on the rate and pattern of economic growth by influencing the volume
and disposition of saving as well as the volume and productivity of
investment. Fiscal policy is best
described as taxation and spending policies that the government pursues in an
effort to influence the overall state of the economy. Oloye (2015) defined
fiscal policy as the means by which a government adjusts its level of spending
in order to monitor and influence a nation’s economy. According to him, fiscal
policy is based on the fact that governments can influence macroeconomic
productivity levels by increasing or decreasing tax levels and public spending.
This influence in turn, curbs inflation, increase employment and maintains a
healthy value of money. Taxation is one
of the primary fiscal policy tools the government has at its disposal to reduce
unemployment. High taxes mean consumers have less disposable income, which
results in less consumption. When consumers buy less, less revenue accrues to
businesses making them less likely to hire new workers or may even result to
laying off workers to reduce cost. Cutting taxes is a common practice which the
government uses to induce economic growth and reduce unemployment. Tax cuts put
more money into the hands of consumers, which can lead to increased revenue for
business and expansion and hiring. Spending on government programmes is another
way government can use to influence unemployment. For example, if the
government funds new public works programmes, such as building infrastructure
like roads or rail ways, it can create jobs that serve to reduce unemployment
and increase disposable income and spending. If such programmes encourage
overall economic growth, employment will be enhanced after the projects are
completed (Obayori, 2016). Monetary policy has a dual mandate of guaranteeing
high employment rate and price stability. At one time or another, economic
agents around the globe have also tried to use monetary policy to achieve
almost every conceivable economic objective with economic growth and low level
unemployment often high in the list.
1.2 Statement of the Problem
The
issue of unemployment in Nigeria has lingered over the years. Policies in
developing countries are designed to stabilize the economy, stimulate growth
and reduce poverty. In Nigeria the achievement of these objectives are
predicted on the stance of fiscal and monetary policies. Over the years the
major goal of monetary policy have often been the two later objective thus
unemployment targeting rate has formed a major policy which dominated the
central bank of Nigeria’s monetary policy focus based on an assumption that
these are essential tools of achieving macroeconomic stability (Udoka and
Anyingang, 2016). Before 1986 the economic environment that guided monetary
policy was characterized by the dominance of the oil sector, the expanding role
of the public in the economy and over dependence on the external sector
(Olarewaju, 2015). The use of market based instrument was not feasible at that
point because of the underdeveloped nature of the financial market and
deliberate restraint on interest rate.
Over
the years unemployment has increased tremendously in Nigeria. It is a social
and economic malady that has eaten deep into the Nigerian economy. The effect
is very calamitous on the government and her citizens. It reduces the standard
of living of members of the society. It has been evidenced that the insecurity,
insurgency and terrorism ravaging the North East region of Nigeria as well as
militancy, kidnapping, sea piracy and pipe line vandalism in the Niger Delta
are as a result of the high rate of unemployment in the country (Danjuma &
Bala, 2014).
Unemployment
negatively impacts on government's ability to generate income and also tends to
reduce economic activity. When unemployment is high, it follows that fewer
people are paying taxes to the government to help it function. One of the goals
of a modern government is to mitigate unemployment and make the environment
conducive for investors to invest in other to create job and ensure price
stability in the economy through effective and proper implementation of fiscal
policies. Fiscal policy is the
government’s management of the economy through the manipulation of its income
and spending power to actualize some desired macroeconomic objectives amongst
which are price stability, minimal unemployment rate and economic growth
(Ozurumba, 2015). Over the years, the
Nigerian Government had adopted various fiscal policy measures to reduce the
problem of unemployment, but still the problem has been on the increase. This
study therefore examines the impact of fiscal and monetary policy in
controlling unemployment in Nigeria.
1.3 Objectives of the Study
The
objective of the study is to examine the impact of fiscal and monetary policy
in controlling unemployment in Nigeria. However, the specific objectives are;
i.
To evaluate the impact of
monetary policy rate on unemployment rate in Nigeria.
ii.
To determine the effect
of government capital expenditure on unemployment rate in Nigeria.
iii.
To assess the extent to
which broad money supply affect unemployment rate in Nigeria.
1.4 Research
Questions
The
under listed research questions were formulated for the study;
i.
To what extent does
monetary policy rate impact on unemployment rate in Nigeria?
ii.
To what extent does government
capital expenditure impact on unemployment rate in Nigeria?
iii.
To what extent does broad
money supply affect unemployment rate in Nigeria?
1.5 Research
Hypotheses
To validate data analysis, the following
null hypotheses have been specified for the study.
H01: There is no significant effect between
monetary policy rate and unemployment rate in Nigeria.
H02: There is no significant effect between
government capital expenditure and unemployment rate in Nigeria.
H03: There is no significant effect between broad
money supply and unemployment rate in Nigeria.
1.6 Significance of the study
This study will inform various
stakeholders in the country on the essence of the monetary and fiscal policies
on Nigeria’s economic growth. It will assist the government to formulate
strategies that will promote a well-managed economy. This research work will
form additional source of literature to scholars and therefore serve as information
for further study. It will furthermore guide the policy makers towards policy
initiation implementation.
Specifically the study will benefit;
Government: the study will benefit the government of Nigeria by providing empirical evidence on the
contribution of impact of fiscal and monetary policy
in controlling unemployment in Nigeria.
Investors: the study will serve as an information tool to both
local and foreign investors on the role of fiscal and monetary policies in
promoting export trade in the country. This will enable them to strategically
hedge on their investments.
Researchers: the work will serve as an empirical literature to
support existing studies on the impact of fiscal and monetary policies in
controlling unemployment in Nigeria. it will also encourage further studies on
the subject matter.
1.7 Scope
of the Study
This study will provide an insight
into the impact of fiscal and monetary policy in controlling unemployment in Nigeria.
The research work covered the period between 1992 - 2016. The choice of the
period was consequence to the toughened economic situation in Nigeria in the
recent times.
1.8 Limitation
of the Study
The major limitation encountered
during the study was the level of variations of results from past studies. Also
most scholars focused on either fiscal or monetary policy, hence the
researchers were careful to make choice of variables.
Other limitation was the combination
of the study with other socio-political engagement to balance the researchers’
relationship with cronies, and data gathering from the internet.
1.9 Definition
of Terms
1.9.1 Fiscal Policy: Fiscal policy is the means by which a government
adjusts its spending levels and tax rates to monitor and influence a nation's economy.
1.9.2 Monetary Policy: Monetary policy is the process by which the
monetary authority of a country, typically the central bank or currency board,
controls either the cost of very short-term borrowing or the monetary base ,
often targeting an inflation rate or interest rate to ensure price stability
and general trust in the currency.
1.9.3. Lending Rate: The lending rate is the charge that a lender
charges a borrower in order to make a loan. The term "lending rate"
is synonymous with the term "interest rate."
1.9.4 Money Supply: the money
supply is the total value of monetary assets available in an economy at a
specific time. There are several ways to define "money", but standard
measures usually include currency in circulation and demand deposits
Click “DOWNLOAD NOW” below to get the complete Projects
FOR QUICK HELP CHAT WITH US NOW!
+(234) 0814 780 1594
Login To Comment