Share This Article:

Money Supply and Inflation in Nigeria: Implications for National Development

Abstract Full-Text HTML XML Download Download as PDF (Size:666KB) PP. 161-170
DOI: 10.4236/me.2013.43018    8,266 Downloads   16,078 Views   Citations

ABSTRACT

The study examines money supply and inflation rate in Nigeria. Secondary data that ranged between 1970-2008 were sourced from the CBN Statistical Bulletin. The study used Vector Auto Regressive (VAR) model. The stationary properties of the model were also explored. The results revealed that money supply and exchange rate were stationary at the level while oil revenue and interest rate were stationary at the first difference. Results from the causality test indicate that there exists a unidirectional causality between money supply and inflation rate as well as interest rate and inflation rate. The causality test runs from money supply to inflation, from the interest rate to inflation and from interest rate to money supply. The paper concludes that government should use the level of inflation as an operational guide in measuring the effectiveness of its monetary policy.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

O. Sola and A. Peter, "Money Supply and Inflation in Nigeria: Implications for National Development," Modern Economy, Vol. 4 No. 3, 2013, pp. 161-170. doi: 10.4236/me.2013.43018.

References

[1] J. K Onoh, “The State of the Nigeria Economy: An Overview of Structural Adjustment Programme in Nigeria: Impact of SFEM on the Nigeria Economy,” Nigerian Institute of International Affairs, Lagos. 1990.
[2] E. J. Hamilton, “The Role of War in Modern Inflation,” Journal of Economic History, Vol. 37, No. 1, 1977, pp. 13-19. doi:10.1017/S0022050700096686
[3] M. C. Vaish, “Macroeconomics Theory,” 11th Edition, UBS Publishers’ PVT Ltd., New Delhi, 2002.
[4] A. J. Chhibber, et. al., “Inflation Price Controls and Fiscal Adjustment in Zimbabwe,” Working Paper No. WPS192, The World Bank, Washington DC, 1989, pp. 21-37.
[5] A. L. Kilindo, “Fiscal Operations, Money Supply and Inflation in Tanzania,” African Economic Research Consortium, AERC Research Paper No. 65, Nairobi, 1997.
[6] B. M. Barungi, “Exchange Rate Policy and Inflation: The Case of Uganda,” African Economic Research Consortium, AERC Research Paper No. 59, Nairobi, 1997.
[7] S. A Laryea and U. R. Sumaila, “Determinants of Inflation in Tanzania,” Chr. Michelson Institute, CMI WorkingPapers WP/2001/12 Bergen, Norway, 2001.
[8] T. A. Oyejide, “Deficit Financing, Inflation and Capital Formation. The Analysis of the Nigerian Economy, 1957-1970,” Nigerian Journal of Economics and Social Studies, Vol. 14, No. 1, 1972, pp. 22-43.
[9] G. Itua, “Structural Determinants of Inflation in Nigeria (1981-1990),” An Unpublished M.Sc. Thesis, Department of Economics, Ahmadu Bello University, Zaria, 2000.
[10] M. Iyoha, “Budget of Economic Growth and Development,” Bullion Publication of CBN, Vol. 26, No. 2, 2002, pp. 12-27.
[11] R. A. Ajisafe, “An Empirical Investigation of the Determinants of Inflation in Nigeria,” Ife Journal of Economics and Finance, Vol. 3, No. 1-2, 1996, pp. 65-94.
[12] B. A. Folorunso and A. G. Abiola, “Long-Run Determinants of Inflation in Nigeria (1970-1998),” Nigeria Journal Economics and Social Studies, Vol. 42, No. 1, 2000, pp. 10-26.
[13] J. O. Osakwe, “Government Expenditure, Money Supply and Prices: 1970-1980,” CBN Economic and Financial Review, Vol. 21, No. 2, 1983, pp. 23-42.
[14] M. A. Onitiri and K. Awosika, “Inflation in Nigeria,” Proceedings of a National Conference convened by the Nigerian Institute of Social and Economic Research, Ibadan, 1982.
[15] F. O. Egwaikhide, “Patterns of Government Revenue and Expenditure in Nigeria: A Historical Survey,” An Unpublished M.Sc. Thesis, University of Ibadan, Nigeria, 1994.
[16] M. Z. Abdul Majid, “Causality Link between Money, Output and Prices in Malaysia: An Empirical Re-Examination,” Applied Econometrics and International Development, Vol. 7, No. 1, 2007, pp. 81-93.
[17] CBN, “CBN Statistical Bulletin,” 50th Anniversary Edition, Lagos, 2010.
[18] K. Ulrich and K. Frauke, “Data Analysis Using Stata,” 2nd Edition, Stata Press, Texas, 2008.
[19] M. A. Adebiyi, “Public Expenditure and Human Capital in Nigeria: An Autoregressive Model,” 2006. www.isser.org/43%20Adebayo.Pdf
[20] S. Olorunfemi, “Infrastructural Services and Manufacturing Growth in Nigeria: A Dynamic Analysis,” The Indian Journal of Economics, Vol. 6, No. 2, 2008.

  
comments powered by Disqus

Copyright © 2019 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.