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Is Inflation Always and Everywhere a Monetary Phenomenon? The Case of Nigeria

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  • Salami Doyin
  • Kelikume Ikechukwu

Abstract

In response to shocks, emanating from the global financial crisis of 2007-2008 the Central Bank of Nigeria has continuously used tight monetary policy instrument to check volatility in the general price level. The success of using monetary policy tool to influence the movement of key macroeconomic aggregates in Nigeria rests solely on the question of whether inflation is driven purely by changes in monetary aggregates. Using quarterly time series data for Nigeria over the period 1970 to 2011, we test the quantity theory relationship between money and price movement to establish if inflation is always and everywhere a monetary phenomenon. Using the autoregressive distributed lag (ARDL) modeling approach we obtained a robust estimate for Nigeria. The result of the study shows that inflation is not always and everywhere a monetary phenomenon in the case of Nigeria raising serious doubt on the continuous use of monetary policy tool to achieve price stability in Nigeria.

Suggested Citation

  • Salami Doyin & Kelikume Ikechukwu, 2013. "Is Inflation Always and Everywhere a Monetary Phenomenon? The Case of Nigeria," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 7(2), pages 105-114.
    • Handle: RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:105-114
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    References listed on IDEAS

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    Cited by:

    1. J. Achua & H. Nagado & I. I. Okafor, 2020. "Is Inflation Always and Everywhere a Monetary Phenomenon? Evidence from Nigeria," Economic and Financial Review, Central Bank of Nigeria, vol. 58(1), March.
    2. Cheng-Wen Lee & Andrian Dolfriandra Huruta, 2021. "Reexamining The Quantity Theory Of Money: An Empirical Analysis From The Joint Hypothesis," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 19(1), pages 3-12, May.
    3. Choudary Ihtasham Ali & Sami Ullah & Umar Ijaz Ahmed & Irfan Ahmad Baig & Muhammad Arqam Iqbal & Amjad Masood, 2022. "Can Food Inflation Be Stabilized By Monetary Policy? A Quantile Regression Approach," Journal of Economic Impact, Science Impact Publishers, vol. 4(3), pages 205-212.

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    More about this item

    Keywords

    Money Supply; Monetary Policy; Policy Regulation; Time Series Model;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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