FOOD INFLATION AND MONETARY POLICY IN NIGERIA: EVIDENCE FROM NONLINEAR ARDL TECHNIQUE
Salimatu Rufai Mohammed (PhD)
Volume 9 Issue 2
Abstract
Given the importance of food prices on the overall inflation dynamics in Nigeria and the need for monetary policy decisions to be guided by the knowledge of asymmetric effects of positive and negative change of monetary policy, this paper applied Nonlinear ARDL modeling technique to investigate the asymmetric effects of monetary policy on food price in Nigeria, using monthly data from September 2005 to August 2022. The results reveal the existence of shortrun and long-run asymmetries in the effects of monetary policy changes on food inflation in Nigeria. The findings also provide empirical evidence that, food inflation is further destabilizing by contractionary monetary policy. Based on the findings, the paper recommends that, fiscal policy must be used to complement monetary policy in stabilizing food prices in a manner that would not require an overly contractionary monetary policy in Nigeria. Keywords: Food inflation, Monetary policy, Nonlinear ARDL, Nigeria
Download Paper