Empirical Analysis of Fiscal Policy on Unemployment in Nigeria: 1981-2016

Abstract

This study examines the impact of fiscal policy on unemployment in Nigeria employing annual time series data from the CBN statistical bulletin (2016) for the period between 1981 and 2016 and an autoregressive distributed lag model. Unemployment rate was made the dependent variable while the fiscal policy tools of real capital expenditure, real recurrent expenditure and real tax revenue were explanatory variables. The findings of the study reveal that unemployment significantly responds negatively to changes in real capital expenditure but positively to real recurrent expenditure and real tax revenue. In the short-run, real government capital expenditure show an insignificant negative impact on unemployment while real recurrent expenditure exhibits negatively and significant impact on unemployment. In the long run, real capital expenditure has a negative and significant impact on unemployment while real recurrent expenditure and real tax revenue exhibit positive and significant impact on unemployment rate.