International Journal of Development and Economic Sustainability (IJDES)

EA Journals

Time Series

The Effect of Fiscal Policy on Financial Sector Development in Sierra Leone: A Time Series Approach (Published)

This study investigates fiscal policy impact on financial sector development in Sierra Leone between 1980 and 2015. The objective of the study is to establish the long run relationship between fiscal policy variable and financial sector development.  The study used a quantitative approach; the model was formulated with Private sector credit used as a proxy variable for financial sector development.  This was regressed against gross domestic product, money supply, real interest rates, inflation and total tax revenue.  The study used error correction model to estimate both long term and short term effects of the explanatory variables on the dependent variables in the empirical functions.  The unit root tests shows that variables in the equations were I(1) variables, meaning they were stationed at first difference using both the Augmented Dickey Fuller  and Philip Pheron tests. The Johansson co integration tests concludes that there are more than one co-integrating factors in each empirical function, therefore a long run relationship exists between private sector credit and its explanatory variables.   To validate the quality of the data for the use of vector auto regression, all of the tests were conducted including; lag length criteria test, serial correlation test, normality test, stability test.  The result from the private sector credit and fiscal and non-fiscal variables in Sierra Leone contradicts most of the theoretical and empirical literature on financial sector development. The conclusion is that even when we are expecting a negative relationship between private sector credit and money supply, real interest rates, total tax revenue and inflation, the results all came out positively and significantly in long run financial economic analysis.  This study shows that the private sector is willing to borrow regardless of the interest rate in the economy and the level of taxation.  Basically the risk appetite in the private sector shows the level of desperation of private institution to access short to medium term capital.  This might explain the reason for the high non-performing loans (NPL) in the economy of Sierra Leone.

Keywords: Fiscal Policy, Sierra Leone, Time Series, financial policies

Informality and Domestic Savings in Nigeria: Lessons from Time Series Analysis (Published)

Following the dearth of empirical evidence on the response of domestic savings to informality in Nigeria, this study examined the impact of informality on domestic savings in Nigeria for the period 1970 to 2011 as a means of providing evidence based policies that will enhance the growth and development of the Nigerian economy. The study employed time series analysis using the OLS estimation procedure. The estimation results of the long run model indicate that informality hinders the growth of domestic savings, while the degree of financial depth impacts significantly and positively on domestic savings in Nigeria. It was also found that the growth rate of real per capita income impacts positively on domestic savings, even though it is not statistically significant in the long run. Based on these findings, we recommended that policy makers and the government should seek to improve the linkage between the formal and informal sectors in Nigeria as this would have a strong positive impact on domestic savings. Deposit money banks and the monetary authority should evolve policies aimed at reaching the unbanked informal sector agents, especially the rural households and the urban informal production units in order to deepen the financial sector and assist in mobilizing the much needed savings that will engender investment and growth in Nigeria. Also, development policy in Nigeria should focus on increasing the productive base of the economy in order to promote real income per capita growth and reduce unemployment.

Keywords: CBN, Domestic Savings, Informality, Nigeria, Time Series

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