In the light of the recent significant changes in the macroeconomic landscape such as increasing. Moreso, the dualistic nature of financial and product market in nigeria constitutes a fundamental. The results revealed that money supply and exchange rate were stationary at the level while oil revenue and interest rate were. The paper utilizes secondary data that were obtained from the international financial statistics ifs, of all variables. The impact of mobile money on monetary and financial stability in subsaharan africa 1 background mobile money has helped reduce the financial exclusion gap in low and middleincome countries, particularly in subsaharan africa, which had almost 400 million registered accounts at the end of 2018. Inflation, or the rate at which the average price of goods or serves. May 09, 2019 inflation can happen if the money supply grows faster than the economic output under otherwise normal economic circumstances. The main purpose of this study is to empirically examine the effectiveness of monetary policy in controlling inflation in nigeria.
The study examines money supply and inflation rate in nigeria. Effectiveness of monetary policy in controlling inflation. With 1 percent increase in money supply, inflation will increase by 152 percent. Exchange rate depreciation and the structure of sectoral prices in nigeria under an alterna tive pricing regime, 198689 by olu ajakaiye and ode ojowu, research paper 25. The federal reserve in the united states measures and publishes the.
Causes, costs, and current status congressional research service 3 reserve cannot force too much money on the economy. Trade, payments liberalization and economic perfonnance in ghana by c. Pdf aimpurpose the aim of this study is to empirically investigate the influence of money supply on inflation in nigeria. Download the full project from chapter one to five with reference and abstract. The dynamics of money supply, exchange rate and inflation in. Exchange rate, interest rate and government expenditure are inversely related to inflation.
When the money supply expands, it lowers the value of the dollar. Pdf a comparative study of monetary and keynesian theories. The money supply inflation is primarily caused by an increase in the money supply that outpaces economic growth. This study revisited the traditional money supply inflation nexus, presented in fisheras equation, but relaxed its basic assumption of constant level of output, within the context of the nigerian economy. Or inflation is attributed to budget deficit financing. Inflation is often defined in terms of its supposed causes. The relationship between money supply and economic growth has been receiving increasing attention than any subject matter in the field of monetary economics in recent years. Effect of inflation on the growth and development of the. The results showed that credit expansion to the private sector determines money supply growth and inflation in nigeria. Dynamic impact of money supply on economic growth in. Therefore, this study, the determinants of inflation in nigeria, will be studied using monetary policy variables broad money supply, exchange rate, one year treasury bill rate and monetary policy rate.
The study employed quasiexperimental research design approach. Pdf the dynamics of money supply, exchange rate and. The granger causality outcome demonstrates that, there is no causality between money supply and inflation in nigeria within the study period and viceversa. And that money supply is a major determinant of inflation. Secondary data that ranged between 19702008 were sourced from the cbn statistical. The impact of monetary policy rate on inflation in nigeria. The effect of interest rates, inflation and money supply on. This is necessary because money is a medium of exchange and changes in its demand relative to supply, necessitate spending adjustments. The money supply is not just cash, but also credit, loans, and mortgages. By money supply we mean the total stock of monetary media of exchange available to a society for use in connection with the economic activity of the country.
Inflation climbs for seventh month in a row in march. Pmi collapses to record low in april on covid19 woes. The greatest effect is realized from the money supply at 169 percent followed by inflation rate at 8. The case of new higher order monetary aggregates1 salihu audu, baba n. Pdf impact of money supply and inflation on economic. The effectiveness of monetary policy in controlling inflation in nigeria with abstract, chapter 15, references and questionnaire. Budget deficit, money supply and inflation in nigeria. The study examined the impact of money supply and inflation on economic growth in nigeria over the period of 19802015 using the nigerian time series data. Money supply growth and inflation rate in nigeria, 1970 2012 8 figure 3. He therefore concluded that changes in money supply are concomitant to inflation in nigeria.
Monetary policy guides the central banks supply of money in order to achieve the objectives of price stability or low inflation rate, full employment, and growth in aggregate income. Exchange rate depreciation, budget deficit and inflation the nigerian experience by f. The study compared the theories of the monetarist and keynesian school of thought with the nigerian economic policies regarding money supply and inflation over a period of thirty five years 19812015. By contrast, if monetary developments deviate from the economic determinants as a result of a shift in money supply that is caused either by a structural change or a shift in the perception of risks, this. Cost push inflation results from surge in the factor inputs such as labour wages, raw materials which is often passed to the final consumers by the supplier or the producer to final consumers in the form of higher prices of commodities. Money supply, output and inflation dynamics in nigeria. To be able to answer these questions, the study sets out to analyse the effects of increase in money supply on inflation in nigeria. Inflation exists when money supply exceeds available goods and services. Inflation can only be reduced to the barest minimum by increasing output level gdp. Overexpansion of the money supply can also create demandpull inflation. Nigeria money supply m0 20002020 data 20212022 forecast.
Monetary growth and inflation dynamics in nigeria central bank of. To the best of the researcher knowledge, there have been little empirical studies done on the causal relationship between inflation, money supply and economic growth in the country. This paper tries to measure the relationship between money growth and inflation for iceland and a sample of ten different countries. This answers the question, and show that there is a relationship between money supply and inflation rate in nigeria. The effect of interest rates, inflation and money supply. Yaaba, hamman ibrahim department of statistics, central bank of nigeria, abuja, nigeria abstract developments in the nigerian financial markets arising from the advent of new instruments, with other. Pdf the influence of money supply on inflation in nigeria. First, the money supply refers to the total sum of money available to the public in the economy at a point of time. The influence of money supply on inflation in nigeria. Effectiveness of monetary policy in controlling inflation in. The explanatory variables accounted for 72% of the variation in. A deficit budget may be financed by the additional money creation. Economic growth, inflation, money supply, money velocity, monetary policy. The dynamics of money supply, exchange rate and inflation in nigeria t.
Doc money supply and inflation in nigeria apir justine. The influence of money supply on inflation in nigeria journal of. Download this complete banking and finance project material titled. The test for stationarity using augmented dickeyfuller adf and phillipperron pp test carried out to test the stationarity of the variables used in the work proved that the variables were stationary, though not in levels, but in first difference. In nigeria the central bank which is at the apex of the banking apples a variety of policy measure and technique with which to control and regulate money and credit in other to attain the desire for necessary to sue the package of discussing the efficiency or other wise of general economic management strategies. Annual time series data, sourced from central bank of nigeria cbn statistical bulletins 19852012 were used to analyze and estimate the three multiple regression models drawn up, with the aid of software package for social sciences spss. Ever since industrialized nations moved away from the gold standard during the past century, the value of money is determined by the amount of currency that is in circulation and the publics perception of the value of that money. Positive and significant relationship between money supply and economic chude, et al. According to the standard concept of money supply, it is composed of the following two elements. Secondary data that ranged between 19702008 were sourced from the cbn statistical bulletin.
The causality test runs from money supply to inflation, from the interest rate to inflation and. Money supply and inflation in nigeria scientific research publishing. This paper attempts to offer evidence on the causal long term relationship between budget deficit, money growth and inflation in nigeria. Inflation, real exchange rate shocks, passthrough, real profits, real broad money supply, inflation persistence, nigeria. Pdf the study examines money supply and inflation rate in nigeria. The supply of money bank behaviour and the implications for. The growth of money supply is correlated with this high inflation episode because money growth was often in excess of real economic growth.
Nigeria needs to reduce money supply growth, improve gdp, reduce interest. Jan 16, 2020 overexpansion of the money supply can also create demandpull inflation. But the situation of monetary expansion or budget deficit may not cause price level to. Journal of economics and sustainable development, 512, 149 155. Figure 2 considers in details a direct link between those indicators, illustrated by the curves of money demand and supply md and ms, as well as the curves islm, representing the. This paper aims at providing quantitative analysis of the dynamics of money supply, exchange rate and inflation in nigeria.
Journal of economics and management the influence of money. There is a general consensus that inflation is strictly a monetary phenomenon. The impact of mobile money on monetary and financial. These are some of the questions this study attempts to answer. The supply of money bank behaviour and the implications. The stanbic ibtc bank nigeria purchasing managers index pmi sank from 53. Money supply data is collected, recorded, and published periodically, typically by the countrys government or central bank.
The paper utilizes secondary data that were obtained from the international financial statistics ifs, of all variables investigated in the model. Impact of money supply and inflation on economic growth in nigeria 197320 article pdf available june 2017 with 1,925 reads how we measure reads. Nigeria money supply m2 20002020 data 20212022 forecast. That is, money supply is a stock concept in sharp contrast to the national income which is a flow representing the value of goods and services produced per unit of time, usually taken as a year.
Inflation can happen if the money supply grows faster than the economic output under otherwise normal economic circumstances. A further increase in the money supply leads to it downfall, marked by points 3 and 4 in figure 1. The upshot of money supply and inflation in nigeria in. Impact of money supply and inflation on economic growth in. Impact of money supply on nigeria economic growth mensch mind. The stationary properties of the model were also explored. The relationship between inflation, money supply and economic. The dynamics of money supply, exchange rate and inflation. What is inflation definition causes of inflation rate.
The idea was to reveal the level of asymmetry in this relationship under conditions of varying levels of economic growth, at every given level of money supply growth. Impact of money supply and inflation on economic growth in nigeria 197320 doi. The relationship between inflation, money supply and. An empirical investigation of the relationship between money. Impact of money supply on nigeria economic growth 19812016 pdf. Nigeria economy gdp, inflation, cpi and interest rate. When the dollar declines relative to the value of foreign currencies, the prices of imports rise. These are near money m1 and broad money m2 cbn, 2003. Inflation, then, cannot be a case in which too much money is chasing too few goods. Money supply and gross domestic product are closely related.
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