By Asogwa, Fredrick Onyebuchi
Low output growth in Nigeria have been attributed to a number of factors such as
poor technology, demographic factors, social conditions, poor macroeconomic policies,
insufftcient infiastructural facilities and high dependence on primary products. What
however, attracts lesser attention is the interface between output growth and
macroeconomic fluctuations. It is not only that output growth is low but it fluctuates
beyond the expectations of different macroeconomic analysts. There have been varying
results among different existing empirical studies on the determinants of output growth
in Nigeria. Most of these studies used cross-country regression to estimate the
determinants of output growth. Cross country regressions suffer from measurement and
specification bias because of the heterogeneous nature of macroeconomic data among
less developed countries.
The current study adds to the existing literature by capturing the volatility
clustering of economic growth and its determinants using country specific regression. It
also addresses the problem of the relationship between current shock on economic
growth and conditional volatility of other periods ahead. This is useful for forecasting
volatility of economic growth and other macroeconomic variables. It fbrther addresses
the problem of determining the factors that are responsible for economic growth and how
structural shocks are transmitted among macroeconomic variables in Nigeria. The study
adopted two approaches: The Exponential Generalized Autoregressive Conditional
Heteroscedasticity (EGARCH) and Vector Error Correction (VEC) models. EGARCH
model was used to trace the determinants of economic fluctuations and the volatility
clustering of economic growth. The VEC model traced the transmission of structural
shocks among the variables.
The results show that fluctuations in economic growth is positively determined
by the level of inflation rate, real interest rate, unemployment rate, but negatively
influenced by investment ratio, per capita income, real exchange rate and the degree of
trade openness It hrther shows that there is transmission of structural shocks between
econon~ic growth and its determinants. However, the transmission mechanism of these
shocks is complex and difficult to determine. The result of the conditional variance
shows that there is high degree of volatility clustering between economic growth and its
determinants. The News Impact Curve (NIC) indicates that the current shock is
influenced by the previous shocks and its effect on other period ahead decays
exponentially.