IMPACT OF MONETARY POLICY ON PRICE STABILITY IN NIGERIA, (1999 – 2021)
Adeneye O. Adeleke (Ph.D)
Volume 2 Issue 2
Abstract
Due to inconclusive and divergent opinion of scholars on the impact monetary policy has on price stability in Nigeria, there is need for further study on the nexus between the two variables. Therefore, the objective of this study is to examine the impact of monetary policy on price stability in Nigeria between the periods of 1999 and 2021. This study adopted the auto-regressive distributed lag model to analyse the time series data collected. Findings from the study reveal that interest rate has positive and statistically insignificant impact, while money supply at different lag has both positive and negative insignificant impact on price stability. More so, cash reserve ratio has negative and significant impact on price stability. Furthermore, finding of the study reveals that MS2 Granger Cause CPI and CPI do not Granger Cause MS2. Given the foregoing, the study therefore recommends that monetary policy authority should effectively and continuously apply interest rate (INR) to achieve price stability, while caution should be exercised in implementing money supply and cash reserve policies to achieve price stability. That is to say, increase or decrease in money supply should base solely on expansionary and contractionary policy targeting at price stability. Keywords: Monetary Policy, Price Stability, Interest Rate, Money Supply, Cash Reserve Ratio.
Download Paper