Effect of Interest Rate Spread on Output Gap in Nigeria (A Var Granger Causality Analysis)

This study examines the effect of interest rate spread on the output gap of Nigeria by using monthly data on the output gap, interest rate spread, foreign direct investment, federal government expenditure, and inflation covering the period of M12010 to M12 2022. Employing the var granger causality model, the result shows that interest rate spread does not granger cause the output gap in Nigeria. Also, variables such as federal government expenditure, foreign direct investment, and inflation do not granger-cause Nigeria’s output gap. Given these findings, policy implications were derived. Keywords: Interest rate spread, output gap, var granger causality test.