Fiscal Policy, Inflation and Economic Growth in Liberia (1970-2014)

The study examined the trend of fiscal, inflation and economic growth in Liberia. It examined the effect of fiscal policy on inflation and economic growth and analyzed the effect of fiscal policy on the relationship between inflation and economic growth, and determined the threshold level at which fiscal policy promoted economic growth in Liberia. The results of the trend analysis showed that there were cyclical movements between fiscal policy variables (government revenue and government expenditure) and macroeconomic variables (Inflation and gross domestic product) (0% in short run to 2.5% in the medium term to 13.6% in the long run) in Liberia for the periods of study. The results on the effect of fiscal policy on inflation and economic growth in Liberia showed that government expenditure did not cause growth in Liberia economy (F=1.89, p>0.05). The results also showed the effect of fiscal policy on the relationship between inflation and economic growth that revenue negatively influenced growth in the short to medium term, that is revenue has no position effect on growth (F=4.50, p>0.05).