Abstract

This study seeks to investigate the impact of fiscal decentralization on macroeconomic performance and stability in Nigeria. It analyzes the effects of the core fiscal decentralization variables of revenue and expenditure decentralization, fiscal dependence and other controlled variables (as suggested by theory) on macroeconomic performance and stability of the Nigerian economy, where macroeconomic performance is proxied by the misery index (which is the combination of inflation and unemployment rates). The error correction mechanism was employed in estimating the model of this study. Findings of the study provided strong evidence that fiscal decentralization, fiscal dependence, investment and interest rate have significant impact on macroeconomic stability in Nigeria with the expected signs of magnitude. The stability test revealed that estimated parameters of the study are stable and useful for policy decision.

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