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Monetary Policy and Price Stability in Nigeria


  • Idoko Ahmed Itodo


  • Seyi Saint Akadiri


  • Rotimi Mathew Ekundayo



Irregular price changes, with its economic consequences of market risks and uncertainties, have been one of the most challenging problems facing the Nigerian economy. Successive financial sector reforms, which seek to enhance the role of monetary policy instruments in macroeconomic management, in view of the theoretical and empirical link between monetary policy and general price level, have been implemented with less than satisfactory results. This paper examines the monetary policy in stabilizing price level in Nigeria. We employ the Vector Autoregressive (VAR) model, with in-built differencing to take care of unit root in these time series data, to capture this relationship. From our findings, we discover that, money supply has no significant relationship with price level in Nigeria. This, we believe, may be due to the influence of the large informal financial sector which controls a very significant fraction of money in circulation. Thus, policy reforms that would curb the influence of the informal financial sector should be implemented in order to allow the central monetary authority to work better, and enhance the role of monetary management in Nigeria.

Suggested Citation

  • Idoko Ahmed Itodo & Seyi Saint Akadiri & Rotimi Mathew Ekundayo, 2017. "Monetary Policy and Price Stability in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 3(2), pages 68-75, June.
  • Handle: RePEc:khe:scajes:v:3:y:2017:i:2:p:68-75

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    References listed on IDEAS

    1. David Fielding, 2008. "Inflation Volatility and Economic Development: Evidence from Nigeria," Working Papers 0807, University of Otago, Department of Economics, revised Sep 2008.
    2. Olusanya E. Olubusoye & Rasheed Oyaromade, 2008. "Modelling the Inflation Process in Nigeria," Working Papers 182, African Economic Research Consortium, Research Department.
    3. Ali F. Darrat, 1984. "The Dominant Influence of Fiscal Actions in Developing Countries," Eastern Economic Journal, Eastern Economic Association, vol. 10(3), pages 271-284, Jul-Sep.
    4. Berlemann, Michael, 2001. "Forecasting inflation via electronic markets: Results from a prototype market," Dresden Discussion Paper Series in Economics 06/01, Technische Universit├Ąt Dresden, Faculty of Business and Economics, Department of Economics.
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    More about this item


    Monetary policy; price stability; money supply; vector autoregressive; Granger causality;

    JEL classification:

    • 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


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