International Journal of Research in Social Sciences
  • Year: 2015
  • Volume: 5
  • Issue: 3

Inflation and economic growth in Nigeria: An application of the granger causality test (1986–2013)

  • Author:
  • Vincent Iorja Gisaor, Ibzan Darius, Iorwuese Tyopev
  • Total Page Count: 15
  • Page Number: 765 to 779

*Department of Economics, Federal University, Wukari - Nigeria

**PhD Student of Economics, Benue State University, Makurdi - Nigeria

Online published on 4 March, 2016.

Abstract

The study was undertaken to empirically examine the theoretical relationship between inflation and economic growth in Nigeria using Granger Causality Test complimented by other econometric tests. The results of the ADF violated the stochastic assumptions of the OLS and the Johansen cointegration test confirmed the existence of a long run relationship between inflation and economic growth. The result of the ECM shows the coefficient of one and two year lagged value of CPI to be positively related to GDP in Nigeria. The granger causality test shows case of bi-directional causality between the CPI and GDP in Nigeria. Recommendations include: Inflationary control measures in Nigeria should take note of the fact that inflation is a serious motivator of growth rate of GDP in Nigeria but the sustained growth rate of the Nigerian economy without developing is not acceptable.