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Do Fiscal Deficits Raise Interest Rates in Nigeria? A Vector Autoregression Approach
Keywords
Fiscal deficits, government debt, interest rates, vector auto-regression
Abstract
The paper examines the effects of fiscal deficits and government debt on interest rates in Nigeria, by applying the Vector Auto-regression approach. The results confirm a positive interest rates effect of fiscal deficits and debt. It is recommended that government revenue base should be increased, while unnecessary spending should be discouraged. Moreover, where deficit financing is inevitable, it should be put into productive activities in order to create more employment opportunities, raise national output, and increase the living standard of the people. This should check interest rates from rising.