An Econometric Analysis of the Nigerian Consumer Price Index
A theoretical model of the inflationary process in Nigeria is developed using monetary aggregates, the exchange rate, and the implicit cost of holding idle cash balances. Parameter estimation is accomplished using quarterly data for 1970:1 through 1993:4 and a nonlinear ARMAX procedure. Equations are estimated using M1 and M2 money suypply measures. Empirical traits for both equations are similar, but out-of- sample simulations with the M2 version generate lower infaltion forecasts than those of the M1 equation.
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