Adeniyi Benjamin ADEDOYIN2024-05-162024-05-162022-12Kate Turabianhttps://repository.lcu.edu.ng/handle/123456789/105The effectiveness of monetary policy has been a long standing issue in developing countries like Nigeria, thus as a result of the recent upsurge in the inflationary rates leading to major economic distortions, it is therefore important to examine if monetary policy tools are effective in management of inflation in the country. The broad objective of this study is to evaluate the effect of monetary policy on inflation rate in Nigeria between 1986 and 2019. The specific objectives are to evaluate the thresholds at which money supply affect inflation rate in Nigeria and to investigate the asymmetric (non-linear) relationship between money supply and inflation rate in Nigeria. Time series data were sourced from the Central Bank of Nigeria (CBN) statistical bulletin and the world development index (WDI). The two objectives were examined using the threshold regression model and the Non-linear Autoregressive Distributed Lag (NARDL). The result showed that the threshold level at which money supply affect inflation rate in Nigeria is 60% which imply that when money supply grows beyond 60% money supply have positive and significant effect on inflation, whereas, below this level, the effect of money supply is less significant though positive, on inflation rate in Nigeria. It was further discovered that in the short run, there is a positive and negative relationship between money supply and inflation rate for a positive and negative change in money supply respectively. Whereas, in the long run, there is a positive relationship between money supply and inflation rate for both positive and negative change in money supply. The study concluded that there exist a threshold level at which money supply affect inflation and that there is an asymmetric non-linear relationship between money supply and inflation rate in Nigeria. It was recommended that the monetary policy authorities institute policies targeted at controlling the level of money supply reasonably below the threshold level and set monetary policies that will ensure the stability of the macroeconomic environment for stabilizing economic activities in the economy. Keywords: Money Supply, Threshold, Asymmetric Effect, Monetary Policy Word Count: 298enThesis