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Vollständiger Titel (Englisch)
Academicus International Scientific Journal
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Verlag
Academicus International Scientific Journal
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ISSN
20793715 (Gedruckte Zeitschrift)
23091088 (Online-Zeitschrift)
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Nummer des Bandes
13
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Erscheinungsdatum der Ausgabe (YYYY/MM)
2016/01
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Vollständiger Titel (Englisch)
Inflation, exchange rate and efficacy of monetary policy in Nigeria: The empirical evidence
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Von (Autor)
Zugehörigkeit
Department of Economics, Ebonyi State University Abakaliki, Nigeria, Dr.
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Number of Pages
14
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Erste Seite
40
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Letzte Seite
53
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Sprache des Textes
Englisch
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Erscheinungsdatum
2016/01
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Copyright
2016 Academicus
Abstract/Hauptbeschreibung
This paper analyses the post SAP persistence of inflation in Nigeria for the period, 1960-2008 with exchange rate, money supply and trade balance as preferred influential variables. To investigate the effect of policy switch from the period of direct instrument to the period of deregulation occasioned by SAP of 1986, we proceed to bifurcate the sample period into two, comprising the period of direct instruments of monetary policy, 1960 – 1985 and the period of indirect instruments of monetary policy, 1986 – 2008. Estimates from a vector auto regression model (VAR) of key macroeconomic variables demonstrate the weak link between money supply and inflation in the both time horizons, which suggests that the hypothesis that money supply is not an effective policy instrument for management of inflationary developments cannot be rejected for Nigeria. The results further suggest that in both time horizons, exchange rate has been identified as a singular most promising macroeconomic fundamental for both internal and external sectors adjustments. However, the deregulation of the domestic economy as occasioned by SAP has significantly diluted the efficacy of exchange rate as a monetary policy instrument for the management of Nigeria’s aggregate money stock and trade balance developments. These notwithstanding, the Central Bank of Nigeria can continue to play a stabilizing role in the economy through the continuation of prudent monetary policies and frequent interventions in exchange rate management to smooth out shocks.
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