Fiscal and monetary policy and its effect on the growth of. A flexible exchange rate policy, which stabilizes output, can do so without high inflation volatility. Chuku 112 measuring the effects of monetary policy innovations in nigeria. Impact of government monetary policy on inflation rate in nigeria abdulrahman aminu jariri department of economics, faculty of management and social sciences, bayero university, kano i. Monetary policy refers to central bank activities that are directed toward influencing the quantity of money and credit in an. Effect of monetary and fiscal policy on nigerias economic. Introduction inflation has become a significant problem for africa and nigeria in particular during the past twenty years. These downside risks create very strong impetus for some sort of policy response like sterilization, fiscal consolidation or controls. This study examined the effectiveness of monetary policy in curbing inflation in nigeria for the period of 34 years 19812015 with a time series data. Secondary data were used empirically to do the assessment. Monetary policy and economic growth in nigeria 19802011. Monetary policy rests on the relationship between the rates of interest in an economy, that is the price at which money can be borrowed, and the total supply of money. The dynamics of monetary policy and inflation in nigeria. More importantly, there are few data on contractionary devaluation in nigeria based on regression and simulation analyses.
Monetary policies played an indispensable role in nigeria s economy by regulating and stabilizing the volume of money in. Oct 19, 2020 motivated by the rising inflation in nigeria, this study examined the impact of monetary policy and inflation in nigeria from 1986 to 2016. The persistent and unacceptably high rises in the general price level in an economy resulting from general loss of purchasing power. Monetary policy and economic growth of nigeria charles onyeiwu university of lagos, lagos state, nigeria email. Introduction inflation in the opinion of many scholars of economics is a worldwide phenomenon and it constitutes a challenge to. It entails those actions initiated by the central bank which aim at influencing the cost and availability of credits horwitz. Prior to 1986, the country practiced exchange rate pegging which was abandoned in favor of more market oriented policies leading to more focus on interest rate. The importance, how to, effect causes relationship, comparison, history, role, solutions are discussed. Analysis of inflation dynamics in nigeria 1981 2015. In addition, the study sought to evaluate ipso facto the extent to which monetary policy has influenced inflation by reducing price volatility and expectation towards zero. But our major concern will be to explore the efficiency of monetary policy in an economy in controlling inflationary pressure in an economy like nigeria. Is the phillips curve useful for monetary policy in nigeria. The nigeria economy has experienced robust gdp growth rates over the reform.
Research questions from the objective of the study, one can deduce the following research questions. Consequently, monetary policy need to be designed to attain a realistic and consistent set of objectives within the general economic policy framework of the country. Impact of monetary policy on inflation control in nigeria. Since the first oil shock in the mid1970s, african inflation rates have averaged more than 15 percent a year. But with time, as confidence in the inflation target grew, monetary policy could take more account of the real economy.
Monetary policy and its effectiveness on economic development in nigeria author. This controversy on efficacy and influence of monetary policy coupled with the state of the nigerian economy in spite of regular application of monetary policy. Inflation, interest rate, exchange rate in nigeria. Inflation and monetary policy in nigeria and its effects. The evolution of monetary policy in nigeria in the past four decades clearly show that though monetary policy management in the country was relatively more successful during the period of financial sector reforms characterized by the use of indirect rather than direct monetary policy tools, nevertheless, the effectiveness of monetary policy has. Nigeria has experienced serious problems of sluggish economic growth, high rates of inflation, excessive increase in money supply and exchange rate depreciation and import dependence. This study employs a simple analytical framework to estimate the intensity and effectiveness of monetary sterilization by the central bank of nigeria. The study adopted interest rate, minimum rediscount rate, liquidity ratio, and cash reserve ratio as proxy for monetary policy instruments and the independent variables. Monetary policy and economic growth of nigeria core. Determinants of inflation, exchange rate, and output in nigeria wp98 160 created date. The implication of the analysis is that discretionary monetary policy inflation.
Thus, the paper recommended among others, the continuous moderation of growth in money supply by the central bank and adopting consumers expectations of inflation as an input into the monetary policy process. Inflation targeting and economic growth nexus in nigeria. Impact of monetary policy on inflation control in nigeria munich. If the phillips curve is a relevant tool for guiding monetary policy, then the central bank of nigeria could control the nominal interest rate and thus affect the output gap, the inflation rate, and the exchange rate. The impact of fiscal and monetary policy on nigerian economic. It is maintained through actions such as increasing interest rate, or changing the amount of money banks need to keep in vault. Chuku 2009 examined the effect of monetary policy innovations in nigeria. Monetary policy, exchange rate and inflation rate in. African journal of accounting, economics, finance and banking research vol. The assertion of this examined the effect of monetary policy variables and inflation on nigeria s. When there is a potent monetary policy instrument, it is expected that contractionary monetary policy shocks should be able to reduce inflationary pressure bongabonga, 2017. A general overview of monetary policy and inflation in the nigerian economy is the foundation upon which the project is developed. Get free research paper on impact of monetary policy in control ling inflation in nigeria our project topics and materials are suitable for students in nigeria with case studies in pdf, doc. It is therefore recommended that domestically produced products of good quality and adequate quantity must be substituted for imported ones and a monetary policy stance that does not easily deviate from the set monetary target should be adopted by the nigerian monetary authorities if persistent.
In nigeria, inflation targeting has been accepted as the principle guiding monetary policy in the government and n. An assessment of monetary policy response to capital inflows. One of the major objectives of monetary policy in nigeria is price stability. Inflation targeting, economic stability and monetary policy. May 02, 2016 the main purpose of this study is to empirically examine the effectiveness of monetary policy in controlling inflation in nigeria. Most studies that evaluated monetary policy effects. The record of growth and development has been very poor despite the various monetary regimes that have been adopted by the central bank of nigeria over the years. Monetary policy transmission and industrial sector growth. An econometric analysis of the monetary policy reaction. Impact of monetary policy on private investment mdpi. For instance, nigeria s real gross domestic product gdp grew at an average of about 2. Understanding inflation in emerging and developing economies.
This will go a long way to improving your project defense preparatory skill. In addition to her contemporary fiscal and monetary policies, the nigerian. The impact of fiscal and monetary policy on nigerian. Monetary policy and its effectiveness on economic development in. Many writers argued that before monetary policy could. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in nigeria and how gdp growth responds to the monetary and fiscal policy shock. The impact of monetary policy on the economic growth of nigeria. Nasko 2016 study showed a significant influence of monetary policy on nigeria economy.
Annual time series data, sourced from central bank of nigeria cbn statistical bulletins 19852012 were used to analyze and estimate the three multiple regression models drawn up, with the aid of software package for social sciences spss. These were regressed against inflation rate, the dependent variable. Monetary policy, inflation and macroeconomic stability introduction monetary policy is one of the macroeconomic instruments with which nations including nigeria do manage their economies. Ogbonna inflation, exchange rate and efficacy of monetary policy in nigeria. The rate of inflation dropped sharply in 1985 and 1986, as favorable weather conditions led to abundant crop production and tight fiscal and monetary policies substantially reduced excess liquidity in the economy figure 2. The paper examined the impact of monetary policy on economic growth in nigeria by developing a model that is able to investigate how monetary policy of the government has affected economic growth through the use of multivariable regression analysis. The increasing inflation rate and its vices in nigeria questions the effort and policies that have been made to combat it or the degree of its implementation, and therefore the need to examine the impact of. The study econometric model was estimated using ordinary least square ols. Effect of monetary policy on inflation and money supply in nigeria. Abstract this research work is an attempt to examine the role of central bank of nigeria in the monetary policy and inflation of nigeria economy. Following the quantity theory of money by fisher 1997 and the model by grauwe 2005 and tang 2008, they specified a model expressing inflation as a nigeria. Nigeria has adopted various monetary policy strategies over the years.
This suggests that monetary stability can contribute towards price stability in the nigerian economy since the variation in price level is mainly caused by money supply, the study concluded that inflation in nigeria is to a much extent a monetary phenomenon. Monetary policy uses a variety of tools to economic growth, inflation, exchange rates with other currencies and unemployment. Nigeria is a monocultural economy, depending on oil as the mainstay of the economy and foreign exchange earner. Inflation, exchange rate and efficacy of monetary policy in. Doc the impact of monetary policy on inflation in nigeria. Impact of monetary policy on economic growth in nigeria. But despite the various monetary regimes that have been adopted by the central bank of nigeria over the years inflation still remains a major threat to nigeria. The research work provide a background to the origin and formation of monetary policy in fighting inflation and highlighted the major functions and activities performed by the central bank of nigeria in doc, pdf. Harmonization of fiscal and monetary policies in nigeria. Determinants of inflation, exchange rate, and output in. Monetary policy and its effectiveness on economic development.
All these variables in turn affect monetary policy and so on through a kind of taylor rule. We proxied the variables of monetary policy instruments to include. Download the complete economics project topic and material chapter 15 titled inflation and monetary policy in nigeria 1981 2015 here on projects. A structural vector autoregressive svar approach chuku a. Using monetary policy shocks for seven advanced economy central banks. It also referred to as the regulation of money supply and interest rate by the cbn in order to control inflation and to stabilize the currency flow in an economy. Effectiveness, monetary policy, inflation, nigeria. Monetary policy, growth, development, optiaml rate, foreign investment created date. Monetary policy and the inflation process bank for international.
Output, inflation, and exchange rate203 n i1 n i0 conducted on the issue in subsaharan africa, particularly nigeria. This has led to reduction in the standard of living of nigerians. The causes of persistent inflation in nigeria victor o. Sep 30, 2016 monetary policy can be developed for encouraging investment and controlling inflation, while fiscal policy can be effective to reducing consumption of luxury and ostentation goods. Nigeria has experienced high volatility in inflation rates. The socioeconomic problems of the nigerian economy are traceable to inflationary. This study was carried out to evaluate inflation accounting and control through monetary policy measures in nigeria from 1973 to 2010. The study empirically examined the impact of monetary policy on selected macroeconomics variables such as gross domestic product, inflation, and balance of payment in nigeria from 19802011. Effect of monetary and fiscal policy on nigerias economic growth. The wikipedia 2015 defined monetary policy as the process by which the monetary authority of a country controls the money supply, which often targets an inflation rate or interest rate to ensure price general trust and stability in the currency. The main thrust of this study shall be on the impact of fiscal and monetary policy instruments on the economic growth of nigeria. Motivated by the rising inflation in nigeria, this study examined the impact of monetary policy and inflation in nigeria from 1986 to 2016. Anchored by a tight fiscal and monetary policy stance, and. Inflation, real exchange rate shocks, passthrough, real profits, real broad money supply, inflation persistence, nigeria.
Monetary policy and inflation in nigeria economy project. Price volatility, expectations and monetary policy in nigeria. The study applied the maximum likelihood estimator in addition to the garch p, q model to estimate the steady state model of inflation. Inflation, exchange rate and efficacy of monetary policy. The monetary policy tools in nigeria have failed to achieve the above. Effect of monetary policy on inflation and money supply in. Devereux 2001, argues that the best monetary policy rule in an open economy is one which stabilizes nontraded goods price inflation and that policy of strict inflation targeting is much more desirable in an economy with limited passthrough. Inflation has eroded the savings level in nigeria and resulted in low levels of domestic and foreign investment. Download the complete economics project topic and material chapter 15 titled impact of monetary policy on economic growth in nigeria here on projects. However, study of this nature is known to be subject to a number of problems or constrains, which are peculiar to the nigerian society such as financial constraints. The influence of money supply on inflation in nigeria. Impact of government monetary policy on inflation rate in nigeria. Inflation is a major problem facing nigeria as a country today.
Flexible inflation targeting was introduced as a generic term to describe a monetary policy where the central bank aims at stabilizing both inflation and the real economy. Effectiveness, monetary policy, inflation, nigeria introduction the socioeconomic problems of the nigerian economy are traceable to inflationary spiral. In doing this, the ordinary least squares method ols is used to analyse data between 1981 and 2008. Effectiveness of monetary policy in reducing inflation in. This study examined the role of monetary policy instruments in controlling inflation in nigeria. Monetary policy, inflation and economic growth in nigeria.
Pdf this study examines the effectiveness of monetary policy in controlling inflation in the nigerian economy using a datarich framework. Monetary policy changes and inflationary pressure in nigeria. For subsaharan africa, the average inflation rate has been closer to 20 percent a year. Effect of monetary and fiscal policy on nigeria s 181 monetary and fiscal policies play a key role in the promotion of the main government objective of promoting the welfare of its citizens. Effect of monetary policy on inflation and money supply in nigeria pdf quantity download now category.
Effectiveness of monetary policy in reducing inflation in nigeria. The major objective of this study is to analyze the effect of monetary policy on inflation and money supply in nigeria within the period of 19862016. The central bank of nigeria cbn, however, has made efforts to fight it using different policy measures, of which monetary policy is one of them. Thank you for your interest in purchasing effect of monetary policy on inflation and money supply in nigeria. Impact of government monetary policy on inflation rate in. Oct 15, 2020 download jamb cbt software now for free. Click the download now button to get the complete project work instantly.
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