This document summarizes a study that analyzed the effectiveness of fiscal policy in Nigeria between 1985-2003. It investigated the impact of fiscal policy on GDP, inflation, and balance of payments. The study found that fiscal policy was effective in controlling inflation and balance of payments, as the models explained 75-76% of variations in these variables. However, fiscal policy was not effective in controlling GDP, as the model only explained 48% of GDP variations. The study concluded that government expenditure was not directed towards productive ventures that could increase GDP. It recommended that government redirect spending towards productive sectors and provide tax concessions to infant industries.
Using time series data, this study investigated the effect of aggregated and disaggregated public spending on economic growth in Nigeria during the period 1980 – 2015. Time series data such as aggregated expenditure proxy by total federal government expenditure (TFGE), disaggregated expenditure proxy by recurrent expenditure (REXP) and capital expenditure (CEXP,) and economic growth proxy by GDP were obtained from central bank of Nigeria (CBN) statistical bulletin. Error Correction Model (ECM) was used to estimate the model. The result of the finding revealed that the total federal government expenditure (TFGE) and capital expenditure (CEXP) exerts positive and significant influences on GDP while recurrent expenditure (REXP) has a positive and insignificant influence on GDP. This implies that the higher the public spending, the higher the GDP. The researchers therefore, recommend that for sustainable Economic Growth (GDP), federal government should increase capital expenditure by allocating more funds to the productive sector of the economy. More so, the positive contributions of public spending to economic growth necessitate the continued use of fiscal policy instruments to pursue macroeconomic objectives in Nigeria.
Using time series data, this study investigated the effect of aggregated and disaggregated public spending on economic growth in Nigeria during the period 1980 – 2015. Time series data such as aggregated expenditure proxy by total federal government expenditure (TFGE), disaggregated expenditure proxy by recurrent expenditure (REXP) and capital expenditure (CEXP,) and economic growth proxy by GDP were obtained from central bank of Nigeria (CBN) statistical bulletin. Error Correction Model (ECM) was used to estimate the model. The result of the finding revealed that the total federal government expenditure (TFGE) and capital expenditure (CEXP) exerts positive and significant influences on GDP while recurrent expenditure (REXP) has a positive and insignificant influence on GDP. This implies that the higher the public spending, the higher the GDP. The researchers therefore, recommend that for sustainable Economic Growth (GDP), federal government should increase capital expenditure by allocating more funds to the productive sector of the economy. More so, the positive contributions of public spending to economic growth necessitate the continued use of fiscal policy instruments to pursue macroeconomic objectives in Nigeria.
Government Expenditure and Economic Growth Nexus: Empirical Evidence from Nig...iosrjce
This study has examined the impact of public expenditure on economic growth in Nigeria using time
series data for the period 1970-2012. Secondary data were sourced from the CBN, NBS, journals, text books
etc. The adopted model was fitted with three variables: real GDP, capital and recurrent expenditure. The tools
of analysis were the ADF unit root test and ordinary least square multiple regression accompanied by pairwise
Granger causality test. The major objective of this study is to analyse the impact as well as direction of
causality between the fiscal variables and economic growth. All the variables included in the model are
stationary at level. Empirical findings from the study show that there is positive and insignificant relationship
between capital expenditure and economic growth while recurrent expenditure had a significant positive impact
on economic growth. Also, Granger causality test demonstrates a unidirectional causality running from the
fiscal variables to economic growth in validation of the Keynesian theory. Consequently, the study
recommended more allocation of resources for recurrent purposes as well; government should establish the
body that will monitor contract awarding process of capital projects closely, to guard against over estimation of
project cost and stealing of public funds.
Empirical Analysis of Fiscal Dominance and the Conduct of Monetary Policy in ...AJHSSR Journal
The study empirically investigates fiscal dominance and the conduct of monetary policy in
Nigeria, using quarterly data from 1986Q1 to 2016Q4. It adopts the vector error correction mechanism (VECM)
and cointegration technique to analyze the data and make inference. The findings reveal that there is no
evidence of fiscal dominance in Nigeria. The empirical results show that budget deficit, domestic debt and
money supply have no significant influence on the average price level. However, budget deficit and domestic
debt are shown to have significant influence on money supply, but only in the short-run. The policy implication
is that the government should enforce fiscal discipline through the appropriate institution and the Central Bank
should be given autonomy to perform the primary function of long-term price stability, among other functions.
impact of monetary policy on economic growth: a case study of south Africa
ini hasil diskusi bersama untuk menyelesaikan studi kasus makroekonomi, khususnya kebijakan moneter
Using a series of econometric techniques, the study analysed interaction between monetary policy and private sector credit in Ghana. This study made use of monthly dataset spanning January 1999 to December 2019 of credit to the private sector (PSC) and broad money supply (M2). The results reveal that there exists cointegration, a long run stationary relation between monetary policy and private sector credit. This implies, increases in credit should prompt long-term increases in monetary policy. It is not surprising that growth in the private sector might have a stronger effect on monetary policy. The Error Correction Test is statistically significant and that all the variables demonstrate similar adjustment speeds. This implies that in the short run, both money supply and credit are somewhat equally responsive to their last period’s equilibrium error. There is unidirectional causation from private sector credit to monetary policy. It can be said that, there is an interaction between money supply and private sector credit. Thus, credit to private sector holds great potential in promoting economic growth. It can be recommended to the government to increase the credit flow to the private sector because of its strategic importance in creating and generating growth of the economy.
EFFECTIVE MONETARY POLICY AS A RECIPE FOR MACROECONOMIC STABILITY IN NIGERIApaperpublications3
Abstract: The basic objective of this paper was to investigate effective monetary policy as a recipe for macroeconomic stability in Nigeria, using annual time series data from 1981 to 2014. The paper employs OLS methodology with all the BLUE assumption. The results show that considering the magnitude, 1% increase in RGDP (proxy for economic growth) is brought about by 0.86% increase in narrow money supply (M1), 0.63% increase in broad money supply (M2), 258% decrease in inflation rate (INFLARATE), 1276.3% increase in lending rate (LEDRATE), and 143.9% increase in gross fixed capital formation. This implies that an increase in lending rate and other related variables will lead to a significant increase in real GDP, proxy for economic growth in Nigeria. The estimated value of R2 (goodness of fit) of 0.67 or 67% shows that 67% systematic variation in Real GDP is caused by variation in narrow money supply, broad money supply, inflation rate, lending rate, and gross fixed capital formation. This indicates that indeed, monetary policy has an effect on macroeconomic stability in Nigeria. The study seems to suggest that concerted efforts should be made by the government to focus on increment in narrow and broad money supplies which will aid in the financing of the country’s monetary growth, balancing the price increase, stimulating increased spending, and further enhancing the country’s macroeconomic variables.
Extant literature revealed that international trade plays a key role to address the economic phenomena and can help to earn foreign exchange. Despite the accruable benefits from international trade and the countrys huge oil export that account for about 90 of its foreign exchange earnings, Nigerias trade balance and exchange rate remain unfavourable. The persistent rise in Nigerias exchange rate and unfavourable trade balance in recent time warrants an empirical probe. This study therefore examines the effect of exchange rate, domestic income, foreign income, consumption expenditure, money supply and interest rate on trade balance using a secondary time series data covering a period of thirty years from 1991 2020. The study employed a regression technique of the Ordinary Least Square OLS . All data used were secondary data obtained from the statistical bulletin of Central Bank of Nigeria CBN and National Bureau of Statistics NBS annual publications. After determining stationarity of the study variables using the ADF Statistic, it was discovered that the variables were all integrated at level, first and second difference, and found out to be stationary at their first difference. The study also using Johansen Cointegration Test, found that there is a long run relationship between the variables. Hence, the implication of this result is that there is a long run relationship between trade balance and other variables used in the model. From the result of the OLS, it is observed that exchange rate, domestic income, foreign income and money supply have a positive and significant impact on trade balance in Nigeria. The study recommends that the government should fixed or peg on the exchange rate through the central bank. This will enable the government to buy and sell its own currency against the currency to which it is pegged. The government should strive to reduce inflation to make exports more competitive. The government should also enhance supply side policies to increase long term competitiveness. Edokobi, Tonna David | Okpala, Ngozi Eugenia | Okoye, Nonso John "Exchange Rate and Trade Balance Nexus" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd45079.pdf Paper URL: https://www.ijtsrd.com/management/public-sector-management/45079/exchange-rate-and-trade-balance-nexus/edokobi-tonna-david
This study examined the effect interest rate on economic growth in Nigeria. Augmented Dickey – Fuller (ADF), Bound Test and Autoregressive Distributed Lag (ARDL) were employed to examine the effect of impact of interest rate on economic growth in Nigeria. The unit root test showed gross domestic product was 1(0) while interest rate, investment and gross capital formation were 1(1). The result of the Bound Test indicated long run relationship among the macroeconomic variables employed in the study. The result of the ARDL indicated that interest rate had negative effect on economic growth both in short run and long run. However, in the long run investment and gross capital formation were established to have positive effect on economic growth with gross capital formation being insignificant. It was concluded that interest rate has a macroeconomic tool is not effective in stimulating economic growth in Nigeria. It was recommended that the level of interest rate should be adequately controlled for the purpose of stimulating economic growth without inflationary pressure. Finally, robust macroeconomic policies aimed at ensuring economic stability should be formulated in order to increase capital formation and attract investment in order to promote economic growth.
This study examines whether economic stability in Indonesia capable predicted by the model Mundell-Fleming. Prediction proxy stability of the interaction of fiscal and monetary policy. During Indonesia's economic stability is largely determined by the strength of economic fundamentals, while economic fundamentals are strongly influenced by fiscal and monetary policies. Therefore flemming Mundell predicts how strong the economic stability in Indonesia ?, the statement in the analysis by using a long-term predictions are Vector Autoregression. Research findings indicate patterns of interaction predictions variety of fiscal and monetary policy, both short term, medium term and long term. It turned out that fiscal policies are derived from taxes are more effective than government spending to control economic growth, investment and inflation, but government spending is more effective to control the exchange rate. The monetary policy of interest rates more effectively control the exchange rate and inflation, while the money supply is more effective in controlling the growth of economy and investment.
Analysis of the effects of monetary and fiscal policy indicators on agricultu...researchagriculture
The research was conducted to determine the effect of monetary and fiscal policy indicators on Nigeria’s agricultural output. The output considered were mainly cereals such as maize, sorghum, rice, millet and wheat while the monetary policy indicators studied were inflation, money supply, interest rate and savings. Budgetary allocation represents the fiscal component while inflation, savings, interest rate, money supply represented monetary policy indicators. One of the fundamental objectives was to examine the relationship between monetary and fiscal policy indicators on agricultural output. Multiple regression was used as the main analytical tool, and the result showed that money supply, budgetary allocation, interest rate were 94%, 54% and 82% significant in the order above i.e. they had significant relationship with output, while inflation and savings were not significant. The result also revealed that within the period of study, agriculture contributed 28% to 35% of the gross domestic product. Forestry and fisheries contributed the least, while crop and animal sub sectors contributed the highest.
Article Citation:
Okidim IA and Albert CO.
Analysis of the Effects of Monetary and Fiscal Policy Indicators on Agricultural
Output (Cereal) (1990-2000).
Journal of Research in Agriculture (2012) 1(1): 058-064.
Full Text:
http://www.jagri.info/documents/AG0021.pdf
The standard Keynesian view of fiscal policy holds that in short-run fiscal adjustments (expansions) reduce (stimulate) aggregate demand and due to sticky wages, prices or other market rigidities, these demand shifts affect the factors of production and output. These conventional predictions have been challenged by the observation of episodes of perverse effects of fiscal policy – so called “non-Keynesian” effects. This paper reassess the short-run consequences of fiscal policy. We provide evidence that consumption reacts in a non-linear fashion to discretionary fiscal policy changes. The results of our estimations show that households tend to behave in non-Keynesian manner when the fiscal situation of a country is bad, i.e. when public debt or fiscal deficit is large, while Keynesian behavior dominates, when the fiscal situation is sound. Our results suggest that, similarly to OECD countries, consumption function does not react in linear fashion to changes in fiscal policy also in transition economies.
Authored by: Piotr Bujak, Joanna Siwinska-Gorzelak
Published in 2003
Government Expenditure and Economic Growth Nexus: Empirical Evidence from Nig...iosrjce
This study has examined the impact of public expenditure on economic growth in Nigeria using time
series data for the period 1970-2012. Secondary data were sourced from the CBN, NBS, journals, text books
etc. The adopted model was fitted with three variables: real GDP, capital and recurrent expenditure. The tools
of analysis were the ADF unit root test and ordinary least square multiple regression accompanied by pairwise
Granger causality test. The major objective of this study is to analyse the impact as well as direction of
causality between the fiscal variables and economic growth. All the variables included in the model are
stationary at level. Empirical findings from the study show that there is positive and insignificant relationship
between capital expenditure and economic growth while recurrent expenditure had a significant positive impact
on economic growth. Also, Granger causality test demonstrates a unidirectional causality running from the
fiscal variables to economic growth in validation of the Keynesian theory. Consequently, the study
recommended more allocation of resources for recurrent purposes as well; government should establish the
body that will monitor contract awarding process of capital projects closely, to guard against over estimation of
project cost and stealing of public funds.
Empirical Analysis of Fiscal Dominance and the Conduct of Monetary Policy in ...AJHSSR Journal
The study empirically investigates fiscal dominance and the conduct of monetary policy in
Nigeria, using quarterly data from 1986Q1 to 2016Q4. It adopts the vector error correction mechanism (VECM)
and cointegration technique to analyze the data and make inference. The findings reveal that there is no
evidence of fiscal dominance in Nigeria. The empirical results show that budget deficit, domestic debt and
money supply have no significant influence on the average price level. However, budget deficit and domestic
debt are shown to have significant influence on money supply, but only in the short-run. The policy implication
is that the government should enforce fiscal discipline through the appropriate institution and the Central Bank
should be given autonomy to perform the primary function of long-term price stability, among other functions.
impact of monetary policy on economic growth: a case study of south Africa
ini hasil diskusi bersama untuk menyelesaikan studi kasus makroekonomi, khususnya kebijakan moneter
Using a series of econometric techniques, the study analysed interaction between monetary policy and private sector credit in Ghana. This study made use of monthly dataset spanning January 1999 to December 2019 of credit to the private sector (PSC) and broad money supply (M2). The results reveal that there exists cointegration, a long run stationary relation between monetary policy and private sector credit. This implies, increases in credit should prompt long-term increases in monetary policy. It is not surprising that growth in the private sector might have a stronger effect on monetary policy. The Error Correction Test is statistically significant and that all the variables demonstrate similar adjustment speeds. This implies that in the short run, both money supply and credit are somewhat equally responsive to their last period’s equilibrium error. There is unidirectional causation from private sector credit to monetary policy. It can be said that, there is an interaction between money supply and private sector credit. Thus, credit to private sector holds great potential in promoting economic growth. It can be recommended to the government to increase the credit flow to the private sector because of its strategic importance in creating and generating growth of the economy.
EFFECTIVE MONETARY POLICY AS A RECIPE FOR MACROECONOMIC STABILITY IN NIGERIApaperpublications3
Abstract: The basic objective of this paper was to investigate effective monetary policy as a recipe for macroeconomic stability in Nigeria, using annual time series data from 1981 to 2014. The paper employs OLS methodology with all the BLUE assumption. The results show that considering the magnitude, 1% increase in RGDP (proxy for economic growth) is brought about by 0.86% increase in narrow money supply (M1), 0.63% increase in broad money supply (M2), 258% decrease in inflation rate (INFLARATE), 1276.3% increase in lending rate (LEDRATE), and 143.9% increase in gross fixed capital formation. This implies that an increase in lending rate and other related variables will lead to a significant increase in real GDP, proxy for economic growth in Nigeria. The estimated value of R2 (goodness of fit) of 0.67 or 67% shows that 67% systematic variation in Real GDP is caused by variation in narrow money supply, broad money supply, inflation rate, lending rate, and gross fixed capital formation. This indicates that indeed, monetary policy has an effect on macroeconomic stability in Nigeria. The study seems to suggest that concerted efforts should be made by the government to focus on increment in narrow and broad money supplies which will aid in the financing of the country’s monetary growth, balancing the price increase, stimulating increased spending, and further enhancing the country’s macroeconomic variables.
Extant literature revealed that international trade plays a key role to address the economic phenomena and can help to earn foreign exchange. Despite the accruable benefits from international trade and the countrys huge oil export that account for about 90 of its foreign exchange earnings, Nigerias trade balance and exchange rate remain unfavourable. The persistent rise in Nigerias exchange rate and unfavourable trade balance in recent time warrants an empirical probe. This study therefore examines the effect of exchange rate, domestic income, foreign income, consumption expenditure, money supply and interest rate on trade balance using a secondary time series data covering a period of thirty years from 1991 2020. The study employed a regression technique of the Ordinary Least Square OLS . All data used were secondary data obtained from the statistical bulletin of Central Bank of Nigeria CBN and National Bureau of Statistics NBS annual publications. After determining stationarity of the study variables using the ADF Statistic, it was discovered that the variables were all integrated at level, first and second difference, and found out to be stationary at their first difference. The study also using Johansen Cointegration Test, found that there is a long run relationship between the variables. Hence, the implication of this result is that there is a long run relationship between trade balance and other variables used in the model. From the result of the OLS, it is observed that exchange rate, domestic income, foreign income and money supply have a positive and significant impact on trade balance in Nigeria. The study recommends that the government should fixed or peg on the exchange rate through the central bank. This will enable the government to buy and sell its own currency against the currency to which it is pegged. The government should strive to reduce inflation to make exports more competitive. The government should also enhance supply side policies to increase long term competitiveness. Edokobi, Tonna David | Okpala, Ngozi Eugenia | Okoye, Nonso John "Exchange Rate and Trade Balance Nexus" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd45079.pdf Paper URL: https://www.ijtsrd.com/management/public-sector-management/45079/exchange-rate-and-trade-balance-nexus/edokobi-tonna-david
This study examined the effect interest rate on economic growth in Nigeria. Augmented Dickey – Fuller (ADF), Bound Test and Autoregressive Distributed Lag (ARDL) were employed to examine the effect of impact of interest rate on economic growth in Nigeria. The unit root test showed gross domestic product was 1(0) while interest rate, investment and gross capital formation were 1(1). The result of the Bound Test indicated long run relationship among the macroeconomic variables employed in the study. The result of the ARDL indicated that interest rate had negative effect on economic growth both in short run and long run. However, in the long run investment and gross capital formation were established to have positive effect on economic growth with gross capital formation being insignificant. It was concluded that interest rate has a macroeconomic tool is not effective in stimulating economic growth in Nigeria. It was recommended that the level of interest rate should be adequately controlled for the purpose of stimulating economic growth without inflationary pressure. Finally, robust macroeconomic policies aimed at ensuring economic stability should be formulated in order to increase capital formation and attract investment in order to promote economic growth.
This study examines whether economic stability in Indonesia capable predicted by the model Mundell-Fleming. Prediction proxy stability of the interaction of fiscal and monetary policy. During Indonesia's economic stability is largely determined by the strength of economic fundamentals, while economic fundamentals are strongly influenced by fiscal and monetary policies. Therefore flemming Mundell predicts how strong the economic stability in Indonesia ?, the statement in the analysis by using a long-term predictions are Vector Autoregression. Research findings indicate patterns of interaction predictions variety of fiscal and monetary policy, both short term, medium term and long term. It turned out that fiscal policies are derived from taxes are more effective than government spending to control economic growth, investment and inflation, but government spending is more effective to control the exchange rate. The monetary policy of interest rates more effectively control the exchange rate and inflation, while the money supply is more effective in controlling the growth of economy and investment.
Analysis of the effects of monetary and fiscal policy indicators on agricultu...researchagriculture
The research was conducted to determine the effect of monetary and fiscal policy indicators on Nigeria’s agricultural output. The output considered were mainly cereals such as maize, sorghum, rice, millet and wheat while the monetary policy indicators studied were inflation, money supply, interest rate and savings. Budgetary allocation represents the fiscal component while inflation, savings, interest rate, money supply represented monetary policy indicators. One of the fundamental objectives was to examine the relationship between monetary and fiscal policy indicators on agricultural output. Multiple regression was used as the main analytical tool, and the result showed that money supply, budgetary allocation, interest rate were 94%, 54% and 82% significant in the order above i.e. they had significant relationship with output, while inflation and savings were not significant. The result also revealed that within the period of study, agriculture contributed 28% to 35% of the gross domestic product. Forestry and fisheries contributed the least, while crop and animal sub sectors contributed the highest.
Article Citation:
Okidim IA and Albert CO.
Analysis of the Effects of Monetary and Fiscal Policy Indicators on Agricultural
Output (Cereal) (1990-2000).
Journal of Research in Agriculture (2012) 1(1): 058-064.
Full Text:
http://www.jagri.info/documents/AG0021.pdf
The standard Keynesian view of fiscal policy holds that in short-run fiscal adjustments (expansions) reduce (stimulate) aggregate demand and due to sticky wages, prices or other market rigidities, these demand shifts affect the factors of production and output. These conventional predictions have been challenged by the observation of episodes of perverse effects of fiscal policy – so called “non-Keynesian” effects. This paper reassess the short-run consequences of fiscal policy. We provide evidence that consumption reacts in a non-linear fashion to discretionary fiscal policy changes. The results of our estimations show that households tend to behave in non-Keynesian manner when the fiscal situation of a country is bad, i.e. when public debt or fiscal deficit is large, while Keynesian behavior dominates, when the fiscal situation is sound. Our results suggest that, similarly to OECD countries, consumption function does not react in linear fashion to changes in fiscal policy also in transition economies.
Authored by: Piotr Bujak, Joanna Siwinska-Gorzelak
Published in 2003
IMPACT OF FISCAL POLICY AND MONETARY POLICY ON THE ECONOMIC GROWTH OF NIGERIA...AJHSSR Journal
ABSTRACT: This research work focused on the impact of fiscal and monetary policy on Nigeria‟s economic
growth between 1980 and 2016. In the study, variables such as government expenditure and taxation revenue
were used to proxy fiscal policy while the broad money supply was employed as a proxy for monetary policy.
The other variable employed as controlled variable is interest rate. The unit root test confirmed that all the
variables were not stationary at levels but were stationary at first difference. Also, the Johansen cointegration
test confirmed that a long run relationship exists between fiscal policy, monetary policy and economic growth in
Nigeria. The empirical results reported using the ordinary least squares technique suggested that fiscal policy
has positive and significant impact on economic growth, and monetary policy has positive impact on economic
growth as well. We, therefore, conclude that both fiscal and monetary policies have positive and significant
impact on Nigeria‟s economic growth between 1980 and 2016. To this end, we recommend that the Federal
Government of Nigeria should focus on using the fiscal policy instruments to stimulate the economy in the
desired direction in order to sustain economic growth process. We also call on the Central Bank of Nigeria to
consistently embark on appropriate and effective monetary policy to boost the economy. Furthermore, since
interest rate is observed to negatively impact economic growth, efforts should be made as lowering the cost of
borrowing in the commercial banks and other financial institutions in order to boost investment and increase
economic growth in the country.
Analyzing the Effect of Government Expenditure on Inflation Rate in Nigeria 1...ijtsrd
Nigeria is a developing economy with active participation of the federal government in various economic sectors not only to promote economic growth and development but also to instill fiscal and economic discipline in the economy. Government participation in the economy means greater funding of economic activities and this is expected to impact on economic indicators. This study analyses the effect of government expenditure on inflation rate in Nigeria within a period of 39 years spanning 1981 2019 . The study specifically seek to ascertain, determine, explore and assess the extent to which government expenditures on key sectors of agriculture, education, health and telecommunications respectively affect inflation rate in Nigeria. In line with the specific objectives of this study, four research questions are raised and four hypotheses duly formulated. Data used for this study were collected from the Central Bank of Nigeria CBN Statistical Bulletin. Government Expenditure on Agriculture GOA , Government Expenditure on Education GOE , Government Expenditure on Health GOH and Government Expenditure on Telecommunication GOT are the independent variables while inflation rate INF is the dependent variable. Descriptive statistics, diagnostic test employing the Augmented Dickey Fuller and a multivariate regression based on Johanson Cointegration and Error Correction Model ECM are used to analyze the data. Our findings indicate that government expenditures on education and agriculture have positive but insignificant effect on inflation rate and on the other hand, government expenditure on health and government expenditure on telecommunications have positive and significant effect on inflation rate. Based on our findings, the study recommends that government should increase its allocation to the health and education sectors to trigger increased skills and healthcare of economic operators for enhanced human capital development and economic productivity. Government should also provide adequate infrastructures to facilitate economic growth and reduce high inflation rate. Mbanefo, Patrick Amaechi | Atueyi, Chidi Leonard "Analyzing the Effect of Government Expenditure on Inflation Rate in Nigeria (1981-2019)" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-6 | Issue-2 , February 2022, URL: https://www.ijtsrd.com/papers/ijtsrd49237.pdf Paper URL: https://www.ijtsrd.com/management/management-development/49237/analyzing-the-effect-of-government-expenditure-on-inflation-rate-in-nigeria-19812019/mbanefo-patrick-amaechi
Effect of Government Policies on Price Stability in Nigeriaijtsrd
This study examined the effect of monetary and fiscal policies on price stability in Nigeria using a data rich framework spanning from 1986 2020. The main problem with the macro economic policies that prompted this study was the fact that despite the series of the CBN Monetary Policy Committee decisions and government tax and expenditure implementation there is apparently no useful effect on inflation price . The study employed Auto regression Distributed Lag ARDL Bound Test for Co integration of data analysis depending upon the time series properties of the data that confer mixed order of integration in addition to the conduct of the unit root test and Error Correction Model ECM estimation. The ADF test revealed that LNCPI, EXR, GSDMD, GEXP, GTX and M2 were stationary at 1 1 while RIR, MPR and BOP at 1 0 . Pesaran, Shin and Smith 2001 established that the ARDL bounds technique allows a mixture of 1 1 and 1 0 variables as regressors. Hence, we proceed to perform the ARDL bounds test for integration. The results of the ARDL bounds revealed that the null hypotheses were all rejected implying that a long run effect exists among monetary and fiscal policies variables and CPI in a multivariate framework. ECM coefficient of 0.2942 conforms with expectation. Durbin Watson statistic 0f 1 9925 revealed that the model seems not to have any case of autocorrelation. The result of our analysis shows that fiscal policy rather than monetary policy exerts a more potent effect on price stability in Nigeria. The study recommends that both monetary and fiscal policies should be complementary in order to be effective in taming inflation in Nigeria. Onehi, Damian Haruna | Ibenta, Steve Nkem | Adigwe, Patrick, K. | Emejulu, Ikenna Justin "Effect of Government Policies on Price Stability in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-7 | Issue-1 , February 2023, URL: https://www.ijtsrd.com/papers/ijtsrd52766.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/52766/effect-of-government-policies-on-price-stability-in-nigeria/onehi-damian-haruna
International Journal of Humanities and Social Science Invention (IJHSSI)inventionjournals
International Journal of Humanities and Social Science Invention (IJHSSI) is an international journal intended for professionals and researchers in all fields of Humanities and Social Science. IJHSSI publishes research articles and reviews within the whole field Humanities and Social Science, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
The Impact of Monetary Policy on Economic Growth and Price Stability in Kenya...iosrjce
The government of Kenya’s economic blueprint dubbed ‘Kenya Vision 2030’ acknowledges the
importance of maintaining a stable macro-economic environment. Despite Kenya implementing monetary
policy aimed at achieving stable prices and fostering economic growth, the economy has been reporting low
economic growth and high rates of inflation. These implies there is still a point of disconnect between what
Central bank of Kenya Pursues and the outcome of the objectives. In this study, structural vector autoregresion
(SVAR) model is estimatedto trace the effects of monetary policy shocks on economic growth and prices in
Kenya. Three alternative monetary policy instruments were put into use i.e. broad money supply (M3), interbank
lending rate (ILR) and the real effective exchange rate (REER). The study found evidence that monetary policy
innovations carried out on the quantity-based nominal anchor (M3) has modest effects on economic growth and
prices with a very fast speed of adjustment. Innovations on the price-based nominal anchors (ILR and REER)
have relative and fleeting effects on real GDP. The study recommended that Central Bank of Kenya should
place more emphasis on the use of the quantity-based nominal anchor rather than the price-based nominal
anchor
The main focus of this study is to investigate the impact of expansion in economic growth on
government expenditure in Nigeria covering the periods 1970 to 2012. Gross Domestic Product (GDP) was
used as a proxy for economic growth, and the GDP time series was decomposed using the partial sum approach
in order to achieve asymmetry in the variable. The asymmetric ARDL estimation technique was appropriately
employed in this study. The findings of this study revealed that expansion in economic growth has significant
impact on government expenditure in Nigeria. The study further provided evidence of long-run causality from
boom/expansion in economic growth to government expenditure in Nigeria but could not support any evidence
of short-run causality. The researcher recommended among others, that Governments in Nigeria should give
more impetus to policies that will guarantee sustainable economic growth.
The Nigerian Government both previous and present has introduced several policies and programmes to reduce or proffer remedial measures to militate against the negative impact of high inflationary levels on the Nigerian economy. All these measures have not led to a productive result as the inflation rate has continued to sour higher over the years. This paper aimed at examining the economic influence of the determinant factors that influence inflationary trends that are multi-dimensional and dynamic which continue to defy solutions. The data used for this work was sourced from the National Bureau of Statistics and Central Bank of Nigeria, from 1983 to 2020. The ordinary least square approach was used to analyze the data and the result shows that consumer’s price index, interest rate and total export has a positive effect on Nigeria inflation, but only the Consumer’s Price Index (CPI) have a statistically significant effect on the Nigeria inflation at 99% confidence interval. Result also shows that the exchange rate, foreign reserve, money supply, real GDP, real income and total imports has a negative effect though not statistically significant on the Nigeria inflation rate. The result of the granger causality test shows exchange rate and total imports to granger cause Nigeria inflation. It is recommended that Government should improve locally manufacture products to meet international demands to reduce total imports.
Monetary Policy and Trade Balance in NigeriaYogeshIJTSRD
Nigeria apex bank Central Bank of Nigeria CBN has continued to battle with the job of reviving the ailing economy and putting it on the path of growth. The economy has witnessed unprecedented job loss, rising poverty level, accelerating inflation, sluggish economic growth and disequilibrium in the balance of trade. The study therefore examine the effect of monetary policy on trade balance in Nigeria. Specifically the study ascertained the extent to which inflation, demand deposit, liquidity ratio, exchange rate and interest rate have influenced trade balance in Nigeria using an econometric regression model of the Ordinary Least Square OLS . From the result of the OLS, it is observed that monetary policy rate, demand deposit, liquidity ratio and exchange rate have a significant positive impact on foreign trade in Nigeria. This means that increases in monetary policy rate, demand deposit, liquidity ratio and exchange rate, will lead to increase in foreign trade in Nigeria. On the other, inflation rate and interest rate has a significant negative impact on foreign trade in Nigeria, meaning that as inflation rate and interest rate increases, will be bring about a decline in foreign trade in Nigeria. Based on the findings of this study, the study recommends that the government should employ a contractionary monetary policy to fight inflation by reducing the money supply in the country through decreased bond price. inflation, demand deposit, liquidity ratio, exchange rate and interest rate have influenced trade balance in Nigeria. The government should intervene in the foreign exchange market in order to build reserves for themselves or provide them to the bank to help stabilize the exchange rate. The government should strive to improve trade performance in the short and long run. They should also reduce government spending and tax capital inflow. Edokobi, Tonna David | Okpala, Ngozi Eugenia | Okoye, Nonso John "Monetary Policy and Trade Balance in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-5 , August 2021, URL: https://www.ijtsrd.com/papers/ijtsrd45080.pdf Paper URL: https://www.ijtsrd.com/management/public-sector-management/45080/monetary-policy-and-trade-balance-in-nigeria/edokobi-tonna-david
Abstract: The paper examines the impact of public sectoral expenditure on economic growth in Nigeria for the period 1981-2013. It was observed that the growth of government expenditure has not fully felt by the economy. The econometric methodology employed is the ARDL model and results show that while the impact of government expenditure on administration and debt servicing were positive on economic growth in the long and short run, expenditure on economic and social sectors has negative impact. We argue that this may not be unconnected with the high level of corruption prevalent in the public sector where funds that are meant for provision or maintenance of social-economic activities like agriculture, roads, transportations, schools and hospitals are diverted for personal use. The CUSUM and CUSUMSQ test show the model is stable as neither of them cross the 5% boundary. The paper recommended that government should increase expenditure to the social and economic sectors while debts or debt servicing should be reduced. Also, corruption so prevalent in the public sector must be minimized if cannot be eradicated.
The paper examines the impact of public sectoral expenditure on economic growth in Nigeria for the period 1981-2013. It was observed that the growth of government expenditure has not fully felt by the economy. The econometric methodology employed is the ARDL model and results show that while the impact of government expenditure on administration and debt servicing were positive on economic growth in the long and short run, expenditure on economic and social sectors has negative impact. We argue that this may not be unconnected with the high level of corruption prevalent in the public sector where funds that are meant for provision or maintenance of social-economic activities like agriculture, roads, transportations, schools and hospitals are diverted for personal use. The CUSUM and CUSUMSQ test show the model is stable as neither of them cross the 5% boundary. The paper recommended that government should increase expenditure to the social and economic sectors while debts or debt servicing should be reduced. Also, corruption so prevalent in the public sector must be minimized if cannot be eradicated.
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Econometric analysis of the effectiveness of fiscal policy in economic growth and stability in nigeria (1985 2003)
1. Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.3, No.9, 2012
Econometric Analysis of the Effectiveness of Fiscal Policy in
Economic Growth and Stability in Nigeria (1985-2003)
Okidim, I. A and Tuaneh, G. L.
Department of Agricultural and Applied Economics/ Ext.
Rivers State university of Science and Technology, Port-Harcourt, Rivers state, Nigeria. PMB 5080. Tel.
08039312859.
Email; iboh.okidim@yahoo.com
Abstract
This work focused on the Econometric Analysis of the Effectiveness of Fiscal Policy in economic growth and
stability in Nigeria between 1985 -2003. The study set four major objectives which include investigating the
effect of fiscal policy on Gross Domestic Product , examining the effectiveness of fiscal policy in the control of
inflation, determining the relationship between government spending and tax and to determine the effect of
budget on investment or employment generation. The study only utilized secondary data from the central bank
of Nigeria. The study specified a workable model in which GDP, inflation and balance of payment were the
dependent variables white government expenditure , tax, capital formation ,foreign exchange rate, household
consumption and money supply were independent variables. Ordinary least square [OLS] Technique, T-test,
F-test were used as analytical techniques. The study revealed that fiscal policy were effective in the control of
the level of inflation and balance of payment since the coefficient of determination (R = 0.75 or 75%) was
significant . on the flip side ; the study showed that fiscal policy was not effective in the control of GDP since the
coefficient of the determination [R2 = 48% ] was not significant . This was confirmed by the F-test and T-test
value . The study recommended that government should redirect its expenditure towards productive venture so
as to increase GDP. Also, infant industries should be given tax concession since increase in tax decreases GDP
and vice versa
1.1 Introduction
Fiscal policy is a stabilization policy which strengthens government operations through the instrumentality of
taxation (Revenue) and expenditure (Gbosi, 2001). Operations of fiscal policy is aimed at economic growth, the
desire to attain economic growth is the focus of every nation (Okidim, 2012). Economic growth refers to a long
term rise in capacity to supply increasingly diverse economic goods and services to its population (Jhingan,
2003). To achieve high level of economic growth, fiscal policy must be directed to the growth sector (real sector)
of every economy because it is capable of increasing tangible output. To this end, fiscal policy could be defined
in terms of macro economic framework as policy that focuses on macro economic activities, using the
instrumentality of government budget. Fiscal policy involves the variation of government expenditure and tax or
revenue in order to achieve macroeconomic objectives. Through careful spending and revenue generation
(taxation) the rate of inflation and unemployment can be reduced which are some of the reasons for fiscal policy
(Budgeting).When government budget surplus, it means it is aimed at controlling inflationary pressure, it does
this by increasing taxes and reducing expenditure which may reduce income and aggregate spending (Nwikina,
2005) conversely, when government budgets deficit, it means it spends more in excess of revenue or taxes, in
which case, the government will finance the budget through borrowing or increase in taxes. The implication of
government borrowing is “crowding out” which edges out private borrowers because of high interest rate
(Okidim, 2012). Fiscal policy is used as tool in smoothening the running of the economy during recession this is
done through the introduction of passive fiscal policy or automatic stabilizer. Automatic stabilizers are national
mechanisms which help the gross product (GNP) to respond to shock during economic depression. Automatic
stabilizers are also known as shock absorbers.
1.2 Problem Statement
More often than not, people commonly speak or argue that the Nigeria economy has myriad or hydra-headed
economic problems. This means that people clearly observe the macro economic instability in Nigeria.
Although, in 2004 the fiscal operations of the federal government improved significantly, this was because
the overall deficit was reduced from N202.7 billion (2.8%) to N142 billion in gross domestic product in 2004.
Even though the economy was adjudged to be fairly good it however, fluctuated because the real gross domestic
product (GDP) was unstable(CBN 2004). Also, other economic indicators such as unemployment, balance of
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2. Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.3, No.9, 2012
payment, exchange rate, prices (urban consumer price index) show some symptoms of ailing economy. It is
against this backdrop that this research is carried out to find out whether the fiscal policy in Nigeria is effective
in economic growth and stability.
1.3 Objectives of the study
The general objective of the study was the econometric analysis of the effectiveness of fiscal policy in economic
growth and stability in Nigeria. While the specific objectives include to:
(1) Investigate the effect of fiscal policy on gross domestic product (GDP).
(2) Examine the effectiveness of fiscal policy in control of inflation.
(3) To determine the relationship between government spending and tax (revenue).
(4) To determine the effect of Budget on investment or employment generation.
2.0 Literature Review
It is a known fact that variation in government expenditure, taxes and money supply affect economic activities.
This has been backed up by different literatures and theories that there is a relationship between macroeconomic
policies objectives such as interest rate, inflation, balance of payment, exchange rate and economic output level
(Gross Domestic Product). Fiscal policy started in the 1950s, when there was economic depression, at that time
market economy could no longer check economic depression (Gbosi 2001). Lord Keynes opposed to this school
of thought because he believed that market economy which is driven by the forces of demand and supply could
not bring about full employment. To this end, Lord Keynes held that the only way to eliminate low productivity
and unemployment was through government intervention, this view was opposed by the classical economists
who believed that an economy functions well if left to operate itself (Colander, 1998). The classical economist
views were based on the long run and not in a short run, that in the long run market that is left to operate itself
will device to adjust wages and prices by itself so as to eliminate unemployment. The classical economists
further argued that government policies, economic institutions, labour unions, can distort the working of a
market economy (Okunroumo, 1993), in real practice, John Kennedy in 1961 adopted the principles of
Keynesian economics, in which fiscal policy became one of America’s main weapon for fighting recession or
inflation. He proposed substantial tax cut to lift the economy out of slump and much later the economy grew
rapidly. Also, in 1981-1982,the American economy was pushed out of recession when president Ronald Reagan
adopted another fiscal policy measure when congress passed his proposed tax cut bill (Samuleson and Nordaus
2005). According to (Gbosi, 2002) that the most effective and popular method of controlling business fluctuation
or maintaining economic stability had been the deliberate use of fiscal policy. The monetarist believe that
government intervention can bring about deliberate alteration of interest rate by the central bank which may not
be healthy for any economy.
Methodology
3.1 Study Area
The study was designed to cover the federal Republic of Nigeria. Nigeria is located on the gulf of Guinea in
West Africa and occupies an Area of 923, 789 square kilometer and is bordered on the east by Republic of
Cameron, on the west by the Republic of Benin, and on the north by Niger Republic. Nigeria has a population
of 151. Million people it has the largest population in Africa, it is also one of the largest producers of oil in the
world her economy depends on oil which supply about 90% of her foreign exchange. Nigeria had her
independence on October 1st 1960. 90% of its population resides in the rural areas and engage in fishing and
farming.
3.2 Method of data collection
This research work only utilized secondary data. It utilized data from the Central Bank of Nigeria (CBN) and the
Nigeria Bureau of statistics (NBS).
3.3 Method Of Data Analysis
Models were specified and ordinary least square (ols) regression was used to analyze the models. Estimation of
parameters of the models required data on government expenditure, tax receipt, domestic investment, foreign
exchange rate, Gross Domestic product at current prices, money supply, inflation rate, unemployment, household
consumption and balance of payment. Some criteria such as coefficient of determination (R2) T-test, f-ratio and
Durbin Watson (DW) statistics were used. Durbin Watson statistics was use to be able to examine the extent of
serial correlation among variables.
Model specification
The following models were specified
GDP = F (x1, x2, x3, x4, x5) + Ut
Where
GDP = Gross Domestic Product (y)
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3. Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.3, No.9, 2012
X1 = Government Expenditure
X2 = Government Revenue (Tax)
X3 = Money Supply
X4 = Foreign exchange rate
X5 = Domestic Investment
Ut = Stochastic (error) variable
Where GDP is the dependent variable and X1 …….. X5 are independent variables which influence growth
(Dependent). explicitly = b1 X1 b2X2, b3X3, b4X4, b5X4 + Ut.
Model 2
INF = F (X1 X2 X3 X4 X5 X6) + Ut
Where inf = Inflation (Dependent variable)
X1 = Government expenditure
X2 = Government Tax
X3 = Money Supply (Ms)
X4 = Unemployment
X5 = Household Demand (Consumption)
X6 = Foreign Exchange Rate
Where X1 …. X5 are the independent variables which affect inflation explicitly, the model could be rewritten as
INF. = F (b1X1 b2X2, b3X3, b4X4, b5X4 b6Xb6 where b1….. b6 are coefficients.
Model 3
Bop = f (X1 X2 X3 X4 X5 X6
Where
Bop = Balance of Payment
X1 = Government Expenditure
X2 = Government Revenue (Tax)
X3 = Money Supply
X4 = Foreign Exchange Rate
X5 = Investment level
X6 = Fixed Capital formation.
The three models where built to ascertain the effect of each independent variable on Balance of payment, Gross
Domestic Product, and inflation.
Results and Discussion
Table 4.1 (see appendix 1) show the various values of both dependent and independent variables. It shows GDP
at current prices, Balance of payment inflation, money supply (Ms) foreign exchange rate, domestic investment,
government expenditure Tax, unemployment, capital formation.
Model 1
In model 1 where the Gross Domestic product is the dependent variable. The GDP had continued to grow from
1985 to 2003 with an abysmal growth in 1996. Likewise government expenditure (X1) government revenue (X2)
also increased and this increased money supply (X3) also. Within this period (1985-2003) domestic investment
and capital formation increased. This research revealed that even though government expenditure increased, this
increase never affected employment positively. This is evident in table 4.1(Appendix1) where unemployment
continue to increase in Nigeria even with increase in government expenditure, the research shows that increase in
government expenditure,(X1) tax(X2), decrease gross domestic product (GDP).
GDP = – 0.078X1 – 0.0047X2
The above equation shows that government expenditure (X1) and increase in Tax (X2) have a negative
relationship with GDP. Domestic investment (X5) money supply (X3) and foreign exchange were positively
correlated with Gross Domestic product (GDP) .
GDP = 4.31X3+ 14600X4+ 500X5,-- the variables X3, X4, X5 show positive relationship with GDP.
Model 2
Model 2 focused on Balance of payment and the various independent variables (x1, x2, x3, x4,x5. The model
revealed that money supply (X3) foreign exchange (x4) and fixed capital formation (X6)) shows a negative
relationship with balance of payment. See equation below:
Bop = f (-2943X3 – 4.59X4 – 10162X5)
The model also revealed that Tax (X2) government expenditure (X1) and domestic investment (X5) are
positively related to Balance of payment this means that a deliberate increase in government expenditure,
domestic investment and government Tax can increase Balance of payment.
64
4. Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.3, No.9, 2012
Model 3
Model 3, shows how the various independent variables affect inflation, which is growth indicator, government
expenditure (X1), Tax (X2) had a positive relationship with inflation. This means that, a deliberate increase in tax
will increase prices of goods also increase in government expenditure can also increase inflation since the model
shows positive relationship. Again, money supply (X3) and foreign exchange X4 also had a positive impact on
inflation
Inf = f (2.346X1 + 8.48X2 + 3709X3 + 694X4).
Summary of regression results.
Models 1, 2 & 3
GDP = f (-0.078x1 – 0.0047x2x4.31x3x1460x4x50x5)
Inflation = (2.346x1+ 8.48X2 + 3.709x3X2.+ 694X4 – 0.001X5+
2.69X6.
Bop = (1327X1 + 692X2 – 2943X3 – 4.59X4+1482X5)
Test of goodness of fit (R2)
Model 1: The coefficient of determination (R2) in model 1 shows that the model was not significant (R2=0.48 or
48%) this shows that only 48% of the variation in the dependent variable GDP was explained by the various
independent variables, 0.52 or 52% was not explained. In model 2 the coefficient of determination R2 = 0.76 or
76%. This means that 76% of total variation in the dependent variable (inflation) was explained by the
independent variables. This shows that the model was significant. Model 3, had 75% (0.75) as its R2 which also
mean that the model was significant since it explained up to 75% of the variation in the dependent variable
(Bop).
T – Test (model 1)
At 5% level of significant, the model showed that there was no significant relationship between GDP and
government expenditure, Tax and money supply since T–test = T-cal (0.013) < T-tab (0.025) this confirmed the
value of R2= 48% which was not significant. The F – Ratio also confirmed the same. This is because the F-tab
(3.37) > F-cal (1.406) at 5% level of significant.
T – test (model 2 and 3)
At 5% level of significant. models 2&3 where shown to be significant. T-cal (4.311) > T-tab 2.26 and Ttab
(3.12)> T-tab (2.26) respectively This shows that inflation and balance of payment (Bop) have significant
relationship with government expenditure, tax and money supply.
Summary
This work focused on the analysis of effectiveness of fiscal policy in economic growth and stability in Nigeria
(1985-2004) essentially, some macroeconomic indicators such as gross domestic product (GDP), inflation and
Balance of payment (Bop) were brought to focus as independent variables, while government expenditure,
government tax (revenue), money supply, domestic investment and household consumption were the
independent variables.
Conclusion
The conclusion emerging from this study is that fiscal policy was only effective in the control of level of
inflation and Balance of payment to a very large extent. But it was ineffective in the control of Gross domestic
Product (GDP). This was because government expenditure and Taxation never had the desired correlation with
GDP. This was probably because expenditure of government may have been directed towards unproductive
ventures.
Recommendations – Base on the outcome of this study, the following recommendations were proffered. That
Government should redirect its expenditure towards productive investment so as to increase output(GDP) That
since the study showed that increase in tax, decreased output, the tax incidence should be lesser on infant
industries so as to encourage productivity and improve GDP.
References
Central Bank of Nigeria(2004).Annual Report and Statement of Account, CBN. Abuja
Colander, O. C. (1997) ,Macroeconomics. London. Mc Graw- Hill p-247
Gbosi, A.N (1997) Fiscal Policy and Macroeconomic Stability in CBN Bi-Annual Review, Lagos. 5(10) pp
14-28
Jhingan, M.L(1985) Advance microeconomic Theory 4th edition. New Delhi, Vikas publishing house
Nwikina,O G (1997) Public Finance; Concept and Practice in Nigeria. Port Harcourt. Harisson Press. P 38
Okidim, I.A. (2012). Assessment of Budgetary Allocation to Agricultural sector and its effect on Agricultural
65
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