A Bound Test Analysis of the Effects of Global Economic Shocks on Nigerian Economy : The Role of Fiscal and Monetary Policies (1960-2011)

This study examines the effectiveness of both fiscal and monetary policies in mitigating external shocks on Nigerian economy. In addition, it determines which of the macroeconomic policy was more effective in mitigating the possible adverse effects of external shocks; The study uses annual data from 1960 to 2011 and data are sourced from Statistical Bulletin of CBN. Also, Mundel-Flemming theoretical framework is adopted to model the interaction between domestic and international macroeconomic policy variables. The time series properties of the variables are examined before the Autoregressive Distributed Lag (ARDL) analytical technique is adopted to estimate the model. Beta coefficient is also generated to determine the effectiveness of each of the policies. The result showed that external shocks had hindered the effectiveness of domestic policy overtime. The result also shows that monetary policy is more effective than the fiscal policy but a coordination of both fiscal and monetary would give a better result