Effectiveness of Economic Policies in Combating Inflation in Nigeria
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Date
2021-12-25
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Publisher
Society for science and education
Abstract
This study assessed the effectiveness of economic policies (monetary and fiscal
policies) in fighting Nigeria's Inflation. Secondary data obtained over thirty-eight
years (1981-2018) from the Central Bank of Nigeria (CBN)'s statistical bulletins
were used. The econometric test was carried out on the data, which included the
ADF-Fisher unit root test and the Johansen co-integration test. A Vector
Autoregressive model was used to specify the relationship between the
independent variables (Interest rate, Money supply and Liquidity ratio) and the
dependent variable (Inflation rate), through the least squares technique. The result
revealed that money supply and lending rate have direct and significant influence
on inflation (p-values<0.05). However, external debt and government expenditure
do not significantly influence inflation. The study concluded that monetary policy is
more effective than fiscal policy in combating inflation. Therefore, it was
recommended that financial institutions in Nigeria should comply with specified
prudential guidelines on monetary policy implementations. Furthermore, the
Central Bank of Nigeria should be allowed to carry out her functions without
pressure or hinderance from any arm of government.
Description
Keywords
Inflation, Money Supply, Interest Rate, External Debt