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Journal ArticleDOI

Inflation accounting and control through monetary policy measures in Nigeria: Multi-regression analysis (1973-2010)

TL;DR: In this paper, a study was carried out to evaluate Inflation accounting and control through monetary policy measures in Nigeria from 1973 to 2010, where aggregate data on independent variables (monetary policy measures) that affect inflation were collected and analyzed using multiple regression model and the ordinary least squares estimation techniques.
Abstract: This study was carried out to evaluate Inflation accounting and control through monetary policy measures in Nigeria from 1973 to 2010. Secondary data were used empirically to do the assessment. Aggregate data on independent variables (monetary policy measures) that affect inflation were collected and analyzed using multiple regression model and the ordinary least squares estimation techniques. From the analysis carried out, it was found that some of the variables (money supply, interest rate and exchange rate) were statistically significant, which means that the studied variable could be used to predict inflation. Furthermore, domestic credit was not statistically significant, even though it could be used as a policy variable to account for inflation. Based on these findings, it was recommended that monetary supply, interest rates and exchange rates should be the principal policy variables to be manipulated in controlling inflation in Nigeria. I. Background of the study Inflation is a serious macroeconomic problem and it is an aspect of macroeconomic instability. It can make a comparison of economic conditions at different point in time quite difficult, creates complications for economic measurement, and brings uncertainty when we try to look into the future. Inflation is a substantial and sustained increase in general price level leading to disequilibrium thus undermining the ability of money to serve as a tool for market coordination. In Nigeria, monetary policy measures are used to control inflation and other macro-economic variables in order to ensure economic stability. Monetary policy involves measures designed to regulate and control the volume, cost, availability and direction of money and credit in an economy to achieve some specific macroeconomic policy objectives (Anyanwu, and Oackhenan, 1995).

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Citations
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01 Jan 2014
TL;DR: In this paper, the authors examined the effectiveness of monetary policy on economic growth and inflation in Nigeria over the period 1970 to 2011 and found that in the short run it is output and inflation that drives monetary growth, while output growth is affected by inflation only.
Abstract: This study examined the effectiveness of monetary policy on economic growth and inflation in Nigeria over the period 1970 to 2011. The lag selection criteria all indicated an optimum lag length of one, therefore a VAR (1) model was estimated using GDP, INTR, CPI, and M2 as endogenous variables. The model was dynamically stable and showed no evidence of serial correlation. Estimation results showed that in the short run it is output and inflation that drives monetary growth, while output growth is affected by inflation only. Results from the impulse response and variance decomposition showed that monetary policy variables may not have an instantaneous impact on output, but are key determinants of output growth in the long–run. Furthermore, in the short–run the level of production is more important in controlling inflation, but it is monetary policy variables that matter in the long–run. Therefore, there is the need to differentiate between short and long run monetary policy targets. It was recommended that, policy makers should concentrate on short-run output expansion policies and put measures in place to sustain growth in the long-run to control inflation. But to maintain longrun output expansion, monetary authorities should aim at adjusting the inter-bank rate but with caution as this can instead cause the problem it is meant to solve.

9 citations


Cites background from "Inflation accounting and control th..."

  • ...Asuquo (2012) evaluated inflation accounting and control through monetary policy measures in Nigeria from 1973 to 2010....

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Dissertation
01 Jan 2015
TL;DR: In this article, the authors examined the relationship between money growth and inflation in Nigeria using cointegration and causality analysis and found that in the long run, money supply growth has significant and positive relationship with inflation while lagged value of money-supply growth has negative and insignificant relationships with inflation in the short run.
Abstract: This study examines the relationship between money growth and inflation in Nigeria using cointegration and causality analysis. The study used annual time series data from 1970 to 2012, Johansen cointegration approach, Vector Error Correction Model (VECM) and Granger causality test are used to identify long run relationship, the short run dynamic and causal relationship among the variables respectively. The empirical results confirm that in the long run money supply growth has significant and positive relationship with inflation while lagged value of money supply growth has negative and insignificant relationship with inflation in the short run. Moreover, the causality test result reveals that money supply growth has unidirectional causal relationship with inflation, the causal relationship runs from money supply growth to inflation. However, interest rates and import have positive and significant relationship with inflation but exchange rates and GDP have negative and significant relationship with inflation in the long run. In the short run lagged GDP variable has significant and positive relationship with inflation, lagged import variable and lagged interest rate variable have significant and negative relationship with inflation, while lagged of exchange rate variable has insignificant and negative relationship with inflation in the short run. Moreover, the causality test result reveals that exchange rate, interest rates and GDP variable have unidirectional, bidirectional and no causal relationship with inflation, respectively. The study concludes that for maintaining price stability and minimum rate of inflation, Nigeria needs to reduce money supply growth, improve GDP, reduce interest rate and impose strong import restrictions measures as well as exchange rate depreciation along with import substitution strategy.

4 citations

Journal ArticleDOI

3 citations


Cites methods from "Inflation accounting and control th..."

  • ...Using multiple regression model and the ordinary least squares (OLS) estimation techniques with data spanning 1973- 2010, Asuquo (2012) showed that monetary variables including money supply, interest rate and exchange rate had significant impact on inflation in Nigeria....

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Journal ArticleDOI
TL;DR: In this article, the authors explored the accounting implications of micro-fiscal measures and quality of real gross national goods and services: empirical evidence from Nigeria for a period of thirty years.
Abstract: The study explored into accounting implications of micro-fiscal measures and quality of real gross national goods and services: empirical evidence from Nigeria for a period of thirty years. The objective was to examine how micro-fiscal measures affect real gross national goods and services using thirty years’ time-series data. The exploratory research methodology was applied and data collected were analysed using multiple regression and other statistical techniques. Findings of the study revealed that significant and direct effects were exerted on gross national goods and services by all the known and identified micro-fiscal measures in the review, except swap and levy ratios which had inverse relationship as revealed by their coefficients obtained from the analysis. Therefore, the government and government agencies have a duty to control macro-fiscal activities in terms of creation of national goods, wealth and services using the identified micro-fiscal mechanisms as the basis for decisions and policies making besides implementation.

3 citations


Cites background or result from "Inflation accounting and control th..."

  • ...In spite of the complications connected with productivity appraisal in the general segment, the benefits of productivity evaluation ought not to be bargain (Asuquo, 2012a)....

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  • ...Anyanwu (1993; 1995), Asuquo (2012a), Asuquo and Effiong (2011) jointly emphasized that it is worthy to note that the national government uses the above enumerated micro-fiscal measures otherwise known as micro-economic variables control the economy in order to achieve the set macro-economic goals....

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  • ...This result is in agreement with the findings made by Asuquo (2012b), which interconnected and linked prices rise ratio to economic growth and development that invariable are greatly influenced by the magnitude and quality of real national goods and services that are produced in the economy in a…...

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  • ...It should be pointed out that the findings above are in agreement with the opinion and submissions made by Abraham (2019), Abdulahi, Aliero and Abdulahi (2012), Abdulahi (2015) and Asuquo (2012a)....

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  • ...Consequently, its fiscal and monetary policies will all aim at providing a thriving economic environment that will in turn enhance productivity as argued by both Asuquo (2012a), and Wuse (2018)....

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Journal Article
TL;DR: In this article, the authors used a simple linear regression approach of measuring economic exposure as slope co-efficient of the regression of stock returns on exchange rates movements to investigate foreign exchange rate risk exposure and the performance of 30 sampled Nigerian companies for the period of 2002-2011.
Abstract: The study investigated foreign exchange rate risk exposure and the performance of 30 sampled Nigerian companies for the period of 2002-2011. The study further investigated the difference in exposure by financial and non-financial firms. The study made use of descriptive and analytical research design and samples were drawn out of the population using random sampling method. A simple linear regression approach of measuring economic exposure as slope co-efficient of the regression of stock returns on exchange rates movements was used. The study utilized three alternative currency exchange rates, viz; the US Dollar, UK pound sterling and Euro effective record exchange rates. The study revealed that Nigerian listed companies are generally exposed to adverse exchange rate risk of the three currencies under consideration, with a higher magnitude of exposure to the US dollar. The study concluded that exchange rate instability is a significant hindrance to corporate performance. Hence, it was recommended that Nigerian companies should try and identify the kind of risk they are exposed to (translational exposure), then employ devices such as hedging, monetary balance, matching receipt and payment, Naira invoicing, currency swap among others in dealing with these risks.

3 citations

References
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Journal ArticleDOI
TL;DR: In this paper, the authors developed four measures of central bank independence and explored their relation with inflation outcomes, including the rate of turnover of the central bank governors, the aggregation of the legal index, and the number of changes in the chief executive of a central bank.
Abstract: Making the central bank an agency with the mandate and reputation for maintaining price stability is a means by which a government can choose the strength of its commitment to price stability. This article develops four measures of central bank independence and explores their relation with inflation outcomes. An aggregate legal index is developed for four decades in 72 countries. Three indicators of actual independence are developed: the rate of turnover of central bank governors, an index based on a questionnaire answered by specialists in 23 countries, and an aggregation of the legal index and the rate of turnover. Legal independence is inversely related to inflation in industrial, but not in developing, countries. In developing countries the actual frequency of change of the chief executive officer of the bank is a better proxy for central bank independence. An inflation-based index of overall central bank independence contributes significantly to explaining cross-country variations in the rate of inflation.

1,600 citations

Book
22 Nov 1956

609 citations


"Inflation accounting and control th..." refers background in this paper

  • ...Friedman (1956) had argued that exchange rate instability is a manifestation of economic volatility....

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01 Jan 2001
TL;DR: In this paper, the authors discuss the evolution of monetary policy in Nigeria in the past four decades and observe that monetary management has been largely more successful under monetary targeting and indirect monetary control introduced since the early 1990s, than during the regime of direct control.
Abstract: This paper discusses the evolution of monetary policy in Nigeria in the past four decades. Overall, the socio-economic 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. Specifically, the existence of fiscal dominance, a persistent liquidity overhang, an oligopolistic banking system and dualistic financial markets are major systemic factors that have undermined the efficacy of monetary policy in Nigeria. The paper, however, observes that monetary management has been largely more successful under monetary targeting and indirect monetary control introduced since the early 1990s, than during the regime of direct control. The author is the Director of Research at the Central Bank of Nigeria. The views expressed in this paper are entirely those of the author and do not necessarily represent the views of the organisation with which he is affiliated. He gratefully acknowledges the research assistance of Mr E.A. Essien in the preparation of this paper.

51 citations


"Inflation accounting and control th..." refers background in this paper

  • ...There is a general consensus in literature that an inefficient payment system distorts the transmission mechanism of monetary policies even when the design and objectives are laudable (Nnanna, 2001)....

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  • ...On the whole, the effectiveness of monetary policy to effectively control inflation depends on the operating economic environment, the institutional framework adopted and the choice and mix of the instruments used (Nnanna, 2001)....

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  • ...Ojo, 2000 and Nnanna, 2001, all opined that empirical studies on inflation, growth and productivity, confirmed long term inverse relationship between inflation and growth....

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  • ...Monetary policy also refers to a combination of measures designed to regulate the value, supply and cost of money in an economy, in consonance with the expected level of economic activity (Nnanna, 2001)....

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  • ...Dualistic financial and product market: The informal sector in Nigeria account for about 30 per cent of GDP (Nnanna, 2001)....

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Book
01 Jan 1984

11 citations