A Small-Size Macroeconometric Model for Nigerian Economy

This paper attempts to develop a small size macro-econometric model of Nigeria’s economy to examine the effects of monetary policy and crude oil price shock on selected macroeconomic variables through forecasting and simulations. The model comprises of 19 equations, out of which 12 are behavioral equations, four identities and three definitional equations. Ordinary Least Square technique is used to estimate the behavioral equations for the period 1981-2012. The estimated model parameters are used to perform simulation experiments to determine the model’s ability to track historical data and to assess the behavior of the selected macroeconomic variables in response to the changes (shocks) in selected exogenous variables. The results give insight in the future path of the main economic variables.