Abstract
This paper examined the responses of Nigeria's manufacturing, agriculture and services sectors to macroeconomic shocks using a Structural Vector Autoregression (SVAR) model. Policy-induced shocks in government expenditure (GEX), government revenue (GTR), inflation, interest rates, real exchange rate (RER) and crude oil prices were analyzed using data from 1985 to 2022, a period of 38 years marked by significant policy volatility. Diagnostic and robustness tests were conducted to ensure efficient estimates. Variance decomposition forecasts and impulse response were used to determine the impact and proportion of changes in sectoral output growth attributable to macroeconomic policy shocks. Summing effects over a ten-year period and calculating average cumulative effects, the analysis identifies the most impactful policy variables for each sector. The findings revealed that the selected macroeconomic variables had positive and significant impacts on the real sectors. Specifically, the manufacturing sector (MGWT) is highly responsive to changes in inflation rates and GEX. The agriculture sector is most affected by fluctuations in the RER, reflecting its dependence on international trade and pricing. The services sector is notably impacted by production costs and the RER. The paper concluded that the real sectors of the Nigerian economy exhibit distinct responses to different macroeconomic policy shocks, with each sector being influenced by specific variables. The MGWT is more sensitive to inflation and government spending, agriculture to the RER and services to production costs and the RER.
Key words: Macroeconomic shocks, industry studies, energy and the macroeconomy, monetary, fiscal policy shocks.
