Monetary Policy, Inflation and Economic Growth in Nigeria
No Thumbnail Available
Date
2022-12
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Lead City University
Abstract
This study examined the effect of monetary policy on inflation and economic growth and ascertained the monetary policy threshold of growth-inflation relationship. This is as a result of the alarming rate of inflation having devastating effects on Nigerian and the failure of policy efforts to curb it. To achieve the objectives, secondary quarterly data from 2009 to 2020 were sourced from CBN and subjected to econometric analysis using the ARDL estimation technique. It was found that only MPR was found to have significant impact on inflation in both the long run and short run, while other variables (LR, INT, GMS, EXR, YG) only have significant relationship in the short run. Also, LR, INT and GMS was found to have a significant impact on economic growth in both the long run and short run. Other variables are only found to be significant in the short run. The interaction of monetary policy (MPR) and inflation on economic growth was found to be negative and significant in the long run be positive and significant in the short run. However, the net effect for both the log and short run were positive. The monetary policy threshold at which inflation can be controlled and growth sustained was found to be 11.36 percent in the short run and 15.20 percent in the long run. The conclusion is that MPR, LR and INT are most effective policy tools in influencing inflation and economic growth in both the long run and short run. It was recommended that the monetary policy authority should increase the use of MPR, INT, and LR as tools in combating inflation and enhancing growth and that the CBN should ensure that the monetary policy rate is between 11.36 and 15.20 percent in order to produce a controlling effect on inflation and sustainable growth.
Keywords: Inflation, Monetary Policy, Economic Growth, Monetary Policy Threshold.
Word Count: 299
Description
Keywords
Citation
Kate Turabian