Monetary policy instruments, target and goals 6 list of figures figure 1. The objectives of monetary policy may vary from country to country but there are two main views. Inflation, money supply, exchange rate, monetary policy rate, error. There were however, no major attempts made to examine inflation and.
Inflation, economic growth, multiple regression model, monetary policy, nigeria. 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. It is the demand side economic policy implemented by the government to achieve macroeconomic objectives like growth, consumption, liquidity and inflation. Generally, this study will dwell on the overview of monetary policy situations in the nigerian economy.
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. The main purpose of this study is to empirically examine the effectiveness of monetary policy in controlling inflation in nigeria. Measured against fiscal policy, monetary policy is said to be quicker at resolving economic shocks uniamikogbo and enoma, 2001. Joining the debate between george and marshall on the effects of economic growth on the distribution of. A general overview of monetary policy and inflation in the nigerian economy is the foundation upon which the project is developed.
Pdf the effectiveness of monetary policy in the control of inflation. The central bank of nigeria left its monetary policy rate at. This work investigated the determinants of inflation in nigeria using a monthly data. Inflation targeting is a monetary policy regime, which is. Inflation is a major problem facing nigeria as a country today. At any rate, combining monetary policy rate with other macroeconomic monetary. Pdf this study assessed the effect of monetary policy instruments on. Monetary policy and inflation in nigeria economy project. Central bank of nigerias monetary and credit policy guidelines and money supply do have impact on the level of outputs.
This study was carried out to evaluate inflation accounting and control through monetary policy measures in nigeria from 1973 to 2010. Pdf monetary policy, inflation and economic growth in. During the early years of independence 196164, which coincided with the second development plan, monetary policy actions were focused on the establishment of a strong financial base and the promotion of domestic financial infrastructure, such as the money and capital market institutions. Monetary policy involves the management of money, the supply of money and interest rate. The dynamics of monetary policy and inflation in nigeria doi. Central bank of nigeria shortterm monetary policy framework in nigeria before 2002, the central bank of nigeria had designed monetary policy in line with fiscal duration of one year monetary policy had always faced the problem of non committal to both intermediate and ultimate targets the optimal longterm policy was not consistent. Nigeria was fortunate in the first half of this decade. The targets of monetary policy are in the case of the cbn are the operational target, the intermediate target and the ultimate targets. The effect of inflation price instability in the growth and development of the nigerian economy cannot be overemphasized. 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.
Central bank of nigeria s monetary and credit policy guidelines and money supply do have impact on the level of outputs. Overall, the socioeconomic and political milieu, including the legal framework under which the central bank of nigeria has operated, was found to be the critical factor that influenced the outcome of monetary policy. Monetary policy as one of the tools of controlling money supply in an economy of a nation by. Impact of monetary policy on inflation control in nigeria. The main purpose of this research work is to evaluate the monetary policy in nigeria. This paper discusses the evolution of monetary policy in nigeria in the past four decades. Inflation, exchange rate and efficacy of monetary policy in nigeria. Specifically, the existence of fiscal dominance, a persistent liquidity overhang, an.
Examine the effect of monetary policy on inflation in nigeria. In nigeria, monetary policy has been in use since the central bank of nigeria was saddled. The monetary authorities will be able to neutralize any deviation in the economy with the neutral money policy. 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. Effectiveness of monetary policy on inflation targeting in. In doing this, the ordinary least squares method ols is used to analyse data between 1981 and 2008. The effectiveness of monetary policy in the control of inflation in. Impact of monetary policy on economic growth in nigeria. The impact of fiscal and monetary policy on nigerian economic. Each school of thought offered its own policy solutions. This study examined the role of monetary policy instruments in controlling inflation in nigeria. However, he recommends a proper blend of monetary and fiscal policies, as at some occasions monetary policy could fail to achieve its objective.
The mpc chose to keep the monetary policy rate unchanged at 12 per cent following todays meeting, partly due to upside risk to inflation. Inflation, exchange rate and efficacy of monetary policy. Monetary policy is one of the prime economic management tools that governments use to shape economic performance. Inflation targeting in nigeriaenglama munich personal repec. Fiscal policy is the means by which a government adjusts its level of spending to monitor and influence a nations economy. The monetary policy committee mpc of the central bank of nigeria cbn, has retained the monetary policy rate mpr at. Effect of inflation on the growth and development of the. Introduction inflation refers to the persistent and the continous rise in the general level of. Central bank of nigeria retains monetary policy rate at. To stabilize the economy, policy makers have often used fiscal and monetary policies to address inflation.
This is approved for students in accountancy, business, computer science, economics, engineering, arts. Secondary data were used empirically to do the assessment. Monetary policy refers to combination of measures designed to regulate the values, supply and cost of money in an economy in consonance with the level of economic activity folawewo and osinubi, 2006. 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.
The impact of monetary policy on economic growth in nigeria investigates the role monetary policy variable in stabilizing the economy of nigeria. Results show that inflation in nigeria is impassive to monetary transmission variables in the model. Get free research paper on monetary policy and inflation in nigeria economy cbnproject topics and materials in nigeria. In nigeria, the monetary policy is the macroeconomic policy laid down by the central bank of nigeria. Kumo 2015 assessed the impact of inflation targeting monetary policy, inflation volatility and economic growth in south africa between 1960 and 20, using garch model on quarterly data. Nigerias gdp growth rate, interest rate, exchange rate, inflation rate and. Objectives and targets of monetary policy in nigeria. The importance, effect, causes, relationship, comparison, history, role, solutions are discussed. We proxied the variables of monetary policy instruments to include. Pdf effect of monetary policy on nigerian economy researchgate. Ascertain the effect of monetary policy on cooperant factors in economic growth in nigeria. The dynamics of monetary policy and inflation in nigeria. Monetary policy and its effectiveness on economic development in nigeria author. Top objectives of monetary policy in nigeria that does not work.
Economic instability is witnessed yearly through rising inflation, massive. These were regressed against inflation rate, the dependent variable. Monetary policy, growth, development, optiaml rate, foreign investment created date. At its 2021 may meeting, the monetary policy committee mpc of the central bank of nigeria cbn left the monetary policy rate as well as all other monetary policy parameters unchanged, broadly in line with market expectations. The impact of monetary policy rate on inflation in nigeria. At its 2223 july meeting, the monetary policy committee mpc of the central bank of nigeria cbn unanimously decided to leave the monetary policy rate as well as all other monetary policy parameters unchanged, in line with market expectations. Babajide, isibor areghan akhanolu and okafor tochukwu subject. In addition to her contemporary fiscal and monetary policies, the nigerian government had implemented various other policies aimed at curbing inflation in the country.
Thus this paper focuses on the use of monetary policy to check inflation in nigeria. 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. These two policies are used to achieve macroeconomic goals in a nation. The impact of fiscal and monetary policy on nigerian. Monetary policy and economic growth of nigeria charles onyeiwu university of lagos, lagos state, nigeria email. Pdf the paper investigated the effectiveness of selected monetary policy. The bank manipulates the operating target reserve money over which it has substantial direct control to influence the intermediate target broad money supply, m2 which in turn impacts on the ultimately or. Similar evidence was also found for the gambia, guinea.
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. Cointegration is a process of combining the degree of nonstationary. The central bank of nigeria, like other central banks in developing countries, achieve. The impact of monetary and fiscal policies on nigerian. 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 effectiveness, output growth and inflation in nigeria. Monetary policy on economic growth in nigeria 19812016. Central bank of nigeria, monetary policy department. 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.
It is used along with the monetary policy, which the central bank uses to influence money supply in a nation. However, study of this nature is known to be subject to a number of problems or constrains, which are peculiar. The neutral monetary policy can help to avoid trade cycles and money inflation. The first view calls for monetary policy to achieve price stability, while the second view seeks to achieve price stability and other macroeconomic objectives.
Nigeria maintains monetary policy rate at 12% premium. Pdf the impact of fiscal policy on inflation in nigeria. Conceptual framework the concept of inflation has been define as a persistence rise in the general price level of broad spectrum of goods. Monetary policy, fiscal policy, economic growth, cointegration, var model. Fiscalmonetary policy and economic growth in nigeria. The results show that monetary policy is an effective policy in achieving targeted inflation in south africa. Monetary policy in nigeriathe central bank of nigeria cbn act of 1958 mandates the bank to promote and maintain monetary stability and a sound financial system in nigeria. Therefore, nigeria will exterminate the bank element in the deflation of economy.
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