ECONOMETRIC ESTIMATION OF INVESTMENT MULTIPLIER IN NIGERIA: AN ARDL APPROACH

Abstract

Investment as a component of aggregate demand may not be the largest of the components, but it is the most volatile. Its volatility is a function of so many other variables that dictates its movement. Investment’s movement thus have a very strong bearing in the ultimate movement of nation’s gross domestic product. This significance of investment in the equation of economic growth and development was the basis for the estimation of Nigeria’s GDP with the aim of determining investment multiplier for the country. Therefore, the broad objective of the study was to estimate investment multiplier for Nigeria. The methodology adopted was autoregressive distributed lag. The data for the methodology was time series data spanning 38 years. Unit root tests using the Augmented Dickey Fuller Test and Phillips-Perron shows that none of the series that make up the model was stationary at level. They were all made stationary after first differencing. The empirical result shows that no cointegration exists among the variables that make up the model. The study also found that for every 1 unit rise in investment, gross domestic product increase by 0.55 unit. It was therefore recommended that policy directives that will drive investment and ultimately drive the nation’s GDP should be rigourously pursued by the economic team of Nigeria.