Mathias A. Chuba

Senior Lecturer, Department of Economics, Achievers University Owo,Km 1, Idasen-Ute Road, P. M. B. 1030, Ondo State, Nigeria

DOI : https://doi.org/10.47191/ijsshr/v4-i10-50

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ABSTRACT

Vermann (2012) and Thies (1996)’s papers indicate that the paradox of thrift is no longer in vogue. This paper argues that the paradox of thrift is applicable to the developing country like Nigeria which is operating with deficient demand. The main objective of this paper is to determine whether the paradox of thrift is applicable to Nigeria. In doing this, a vector error correction model was estimated using annual data of gross national income, gross domestic saving, gross domestic investment and final consumption expenditure from 1986 to 2019. The results of the investigation showed final consumption expenditure and gross domestic saving increase when national income increases. Gross national income falls and current saving is unchanged when previous saving rises. The paradox of thrift is applicable to Nigeria. The target of economic policy should be gross national income and not gross domestic saving because naturally both final consumption expenditure and gross domestic saving will increase if gross national income increases in Nigeria.

Keywords

Paradox of Thrift, Vector Error Correction Model, Nigeria

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VOlUME 04 ISSUE 10 OCTOBER 2021