Can Pension Reforms Moderate Inflation Expectations and Spur Savings? Evidence from Nigeria
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This paper tests the prior-savings theory which proposes that pension savings could moderate
inflation, and spur long-tenured savings for fixed capital formation. An augmented Toda-Yamamoto longrun
non-causality technique was used to analyze data from 1980 to 2018. The outcome reveals that
pension saving has significant negative causal flow to gross fixed capital formation, while gross fixed
capital formation does not drive inflation expectation. The outcome suggests that prior-savings theory
does not hold in the Nigerian case, which may infer that government borrowing from pension fund has
been for consumption expenditure. The results generalize many developing economies with similar
financial structure. The paper recommends that borrowed pension savings be invested in infrastructures in
line with prior-saving theory. Fiscal policy reforms that broaden and deepen the nexus are recommended.
Keywords
HB Economic Theory, HG Finance