The Effectiveness of Monetary Policy in the Control of Inflation in Nigeria: An Ecm Approach
Journal Title: IOSR Journal of Economics and Finance (IOSR-JEF) - Year 2018, Vol 9, Issue 1
Abstract
The paper investigated the effectiveness of selected monetary policy tools in the control of inflation in Nigeria. Data used are monthly data covering the period January, 2009 to December, 2016 sourced from Central Bank of Nigeria statistical bulletin2016. The study estimated the Augmented Dickey-Fuller (ADF) unit root test, Johansen Cointegration test and the Error Correction Model (ECM). Result of the ADF showed that all the variables are integrated of order I(1), except for the Error Correction Term (ECT) which is stationary of order I(0). The Johansen cointegration test result revealed the presence of a long-run relationship between inflation rate and the selected monetary policy variables. The ECM result revealed that the estimated model has a self-equilibrating mechanism of 12%. The paper concludes that Treasury Bill Rate (TBR) is an effective tool in controlling inflation both in the short and long run. While Exchange Rate(EXR) and Money Supply(MS) are very effective monetary policy tools in the control of inflation in the short run. Monetary Policy Rate (MPR)is effective in the long run. Therefore, it is recommended that the monetary authority in Nigeria should regulate EXR and MS in controlling inflation to achieve a short-term result. TBR should be used to control the rate of inflation both in the short and long-run, while MPR should be used to control inflation for a long-term result.
Authors and Affiliations
Akarara Ebierinyo Ayebaemi, Azebi, Oyeinbrakemi Innocent
Keywords
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- EP ID EP414478
- DOI 10.9790/5933-0901028694.
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