Analysis of Business Cycles and Economic Growth in Nigeria (1970-2012)

The  study of economic fluctuations and  the  international  policies  needed  to  shield the world economy against World Economic depression  have  given  a renewed stimulus to research interest in the linkages between Business cycles and economic performance at country specific. There is no doubt that many studies have attempted to analyze Business Cycles but very few have check for the direction of causality between Business Cycles and Economic Grow. This research tests for causal relationship between Business Cycles and Economic growth in Nigeria employing systematic econometric methods such as the Johansen Cointegration test, vector autoregressive models (VAR) and Granger causality tests using annual data from 1970 to 2012. The study found that there is a Bi-directional Granger Causality running from the independent variables (M2, GEXP) to the target variable (GR) and also a unidirectional causality running from EXR to GR. No causality was found to run from DINTR to GR. We used the Impulse Response Function to achieve the two remaining objectives; That actually shocks in these independent variables proxied for the Business Cycles affected the Economy within the time period and also that Money Supply shocks is the most Important to the economy because of its impacts to the economy, if not keenly watched is likely to have a detrimental impact on the nation’s economy. Given the findings, the empirical assessment has direct policy relevance in Nigeria.