DETERMINANTS OF ECONOMIC GROWTH IN NIGERIA: AN AUTOREGRESSIVE DISTRIBUTED LAG (ARDL) MODELING APPROACH

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ABSTRACT


The research also examines the relationship between the ARDL procedure and the fully modified OLS approach of Phillips and Hansen to estimation of cointegrating relationship between all the variables, and economic growth, these results provide strong evidence in favor of a rehabilitation of the traditional ARDL approach to time Series econometric modelling. The ARDL approach has the additional advantage of yielding consistent estimates of the long-run co-efficient that is asymptotically normal irrespective of whether the underlying regressors are I(1) or I(0).,This research provides an empirical analysis of the relationship between economic growth and its determinants factors with special focus on gross domestic product, foreign direct investment and other important factors in Nigeria, using data from the period of 1976 to 2010, we also in employed ARDL bounds testing for the long run relationship and ECM for the short run dynamics. The findings suggest a positive relationship between efficient real GDP and foreign direct investment and economic growth both in short run and long run. Money supply and inflation have negative effects on economic growth while fiscal deficit and foreign direct investment have positive effects on growth. Foreign direct investment is found to have significant positive effect on growth. The results are consistent with the theoretical and empirical prediction.


TABLE OF CONTENTS

TITLE PAGE
TABLE OF CONTENTS
LIST OF FIGURES
LIST OF TABLES
ABBREVIATIONS
ABSTRACT

CHAPTER ONE
1.1       Introduction
1.2       Background of the Study
1.3       Statement of the Problems
1.4       Research Questions
1.5       Aims and Objectives of the Study
1.6       Research Hypothesis
1.7       Significance of the Study

CHAPTER TWO: LITERATURE REVIEW
2.1       Introduction
2.2       Nature and Structure of the Nigerian Economy
2.3       Some Factors Used to Determine Nigerian Economy
2.4       Advantages of the ARDL Models Over Other Techniques

CHAPTER THREE: THEORETICAL FRAMEWORK AND METHODOLOGY
3.1       Introduction
3.2       Data Sources and Description of Variables
3.3       Autoregressive Distributed Lag (ARDL) Model
3.3.1    General Model for the ARDL
3.3.2    Main Features of the ARDL Approach
3.4       Co-integration Test
3.5       Unit Root Tests
3.5.1    Augmented Dickey Fuller (ADF) Test
3.5.2    Hypothesis Testing
3.5.3    Kwiatkowski, Philip, Schmidt, and Shin (KPSS) Test
3.6       ARDL Bounds Test Approach
3.6.1    The General Bound Test For ARDL Model
3.7       Long Run Model
3.8       Short Run Model
3.9       Error Correction Model
3.10     Diagnostics Test
3.11     Testing for Serial Correlation
3.11.1  Durbin-Watson d-Test
3.11.2  Breusch-Godfrey or Lagrange Multiplier Test
3.11.3  Stability Test
3.14     Hypothesis
3.15     Maximum Likelihood Estimation
3.16     Software’s For The Analysis
3.17     Model Selection Method
3.18     Models Specification
3.19     Using ARDL Model for Estimated Variables
3.20     Using Unit Root Test for the Variables
3.21     Bound Test Approach
3.22     Long Run Specification Model
3.23     Short Run Specification Model

CHAPTER FOUR: RESULTS AND DISCUSSION
4.1       Tests for Non-Stationery
4.2       Results for Unit Root Test
4.3       Graphical Solutions of the Unit Root Tests
4.4       Plot of CUSUM and CUSUMSQ (Stability Test) For LGDP as Depended Variable
4.5       Analysis Using ARDL for LFDI as Depended Variable
4.5.1    Plot of CUSUM and CUSUMSQ (Stability Test) for FDI

CHAPTER FIVE: SUMMARY, CONLUSION AND RECOMMENDATION
5.1       Summary
5.2       Conclusion
5.3       Recommendation
            REFERENCES


CHAPTER ONE

1.1         Introduction

Economically developed countries have been able to reduce their poverty level, strengthen their social and political institutions, improve their quality of life, preserve natural environments and achieve political stability [Barro (1996); Easterly (1999); Dollar and Kraay (2002a); Fajnzylber,. (2002)]. After the World War II, most of the countries adopted aggressive economic policies to improve the growth rate of real gross domestic product (GDP). The neoclassical growth models imply that during the evolution between steady states; technology, exogenous rate of savings, population growth and technical progress generate higher growth level (Solow 1956).

Endogenous growth model developed by Romer (1986) and Lucas (1988) argue that permanent increase in growth rate depends on the assumption of constant and increasing return to capita1.

Similarly, Barro and Lee (1992) investigate the empirical association between human capital and economic growth. They seem to support endogenous growth model by Romer (1990) that high light the role of foreign direct investment in the growth process. Fischer (1993) argue that long-term growth is negatively linked with inflation and positively correlated with better fiscal performance and factual foreign exchange markets. In the context of developing countries, investment both in foreign direct investment, money supply, and ability to adapt technological changes, open trade policies and low inflation are necessary for economic growth.

1.2 Background of the Study

Nigeria is a West African economy with a long coastline along the Atlantic Ocean. The country shares international borders with Benin, Chad, Cameroon and Niger. Nigeria.... 


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