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An examination of inter-regional spillover effects of macroeconomic policies in Nigeria

Olajide, Victor (2015): An examination of inter-regional spillover effects of macroeconomic policies in Nigeria.

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Abstract

Regions in a federal system, as in the case Nigeria, tend to have economic characteristics that diverge from each other and while monetary and fiscal policies appear to be strongly nationally oriented their importance and relevance appear to be regionally determined. However, also important, and more important for this study, is the view that regional macroeconomic policies – that is, the fiscal policies of the state or regional governments and the implications of national monetary policies for regional economies – do not only impact on the source region but can also transcend the borders of the source region to other neighboring regions and cause adjustments or distortions that may have important macroeconomic implications for the regions in a federating system. Towards this end, this article investigates, using the aggregate supply, aggregate demand and balance of payment (AS/AD/BP) framework with special assumptions that capture the characteristics of the regions in a federating system typical of Nigeria, the macroeconomic interconnectedness of regions in a federating unit and considers the macroeconomic spillover effects of the fiscal policies of regional governments as well as the regional implications of national monetary policies.

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