Oil Price Shocks and Fiscal Spending in Oil Producing Economy: The Role of Asymmetry

Given their over reliance on proceeds from the sale of crude oil, fiscal spending in the oil-producing economy are often characterised with some specific challenges mainly due to the uncertainty in the nature of oil price movements in the international crude oil market. Motivated by the historical up – down trends in the international oil prices and their potential implications particularly for oil-producing countries, this paper explores linear and non-linear ARDL frameworks to examine the symmetric and asymmetric impact of oil price shocks on fiscal spending. Using the case of the Nigerian economy, this empirical finding suggests that shocks to international oil prices did matter for fiscal spending in the oil-producing economy. On the direction of the impact of the shocks, the finding of the non-rejection of the null hypothesis of no asymmetry thus implies that fiscal spending in Nigeria reacts indifferently to either a positive or negative oil price shocks.