Mitigating the impact of a pandemic: a time-varying-parameter structural VAR (TVP-SVAR) and time-varying granger causality estimations
African Journal of Economic and Management Studies
ISSN: 2040-0705
Article publication date: 21 September 2023
Issue publication date: 5 February 2024
Abstract
Purpose
The study investigates the effectiveness of government policies to mitigate the impact of a pandemic. The study adopts the small open economy of Nigeria for the following reasons. First, Nigeria is the largest economy in SSA. Second, Nigeria was also significantly impacted by the COVID-19 pandemic.
Design/methodology/approach
The study employed the time-varying structural autoregressive (TVSVAR) model to control for the potential asymmetry in fiscal variables and to control for the shift in the structural shift, following a macroeconomic shock. As a form of robustness, the study also implements the time-varying Granger causality to formally assess the temporal instability of the variable of interest.
Findings
The results show that an oil price shock is an important source of macroeconomic instability in Nigeria. Importantly, the results indicate that the effects of fiscal policy are strongly time varying. Specifically, the results show that fiscal policy helps to stabilize the economy, (i.e. they help to reduce inflation and spur output growth) following macroeconomic shock. Further, the Granger test shows that fiscal policy helped to spur growth in Nigeria. The research and policy implications are discussed.
Originality/value
The study accounts for the time-varying effects of fiscal policy.
Keywords
Acknowledgements
The research is funded by Tshwane University of Technology, Pretoria. South Africa.
Citation
Olaoye, O.O. and Zerihun, M.F. (2024), "Mitigating the impact of a pandemic: a time-varying-parameter structural VAR (TVP-SVAR) and time-varying granger causality estimations", African Journal of Economic and Management Studies, Vol. 15 No. 1, pp. 104-131. https://doi.org/10.1108/AJEMS-05-2023-0179
Publisher
:Emerald Publishing Limited
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