Fiscal Policy, Institutional Quality and Economy Development in Nigeria

Over the years, economists have debated the reasons for differences among countries’ economic growth and development. This study examines the impact of institutional quality and fiscal policy on economic growth and development in Nigeria using time series data spanning from 1970-2016. The study employed Augmented dickey fuller (ADF), Philip person(PP) and Kwiatkowski-Phillips-schmids-shin(KPSS) for unit root test, some of the variables I (0)and some are I (1), which called for cointegration test using  Johansen cointegration test. The result shows three cointegrated equations, and ARDL was used to estimate the short and long-run impact of institutional quality and fiscal policy on economic growth. The result indicates that institutional quality, government expenditure, and the lag of GDP positively impact economic growth and development in Nigeria in both the short and long run. At the same time, fiscal deficit and inflation positively impact economic growth in the long run but are not statistically significant. Similarly, fiscal policy harms economic growth in Nigeria in the short run but has a positive impact in the long run. The study identifies the importance of institutional quality as a determinant of economic growth and development. The implication is that if the roles of institutions are secure, it will help secure property rights, which will provide incentives for economic growth in the world. It will also lead to an efficient allocation of government expenditure and fiscal policy, which will bust economic growth and development.