AN ASSESSMENT OF THE EFFECT OF MONEY SUPPLY IN NIGERIAN INFLATIONARY TRENDS, 1970-1993
AN ASSESSMENT OF THE EFFECT OF MONEY SUPPLY IN NIGERIAN INFLATIONARY TRENDS, 1970-1993
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Date
1999-02
Authors
OMOFA, MOSES NIYI GBENGA
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Abstract
A lot of contentions and debate have been generated in Economics as regards the
relative importance of the monetary Policy vis-a-vis the fiscal policy in controlling the
economic variables of a nation. Of recent again, is the debate between the monetarists and
structuralists about the best way to tame price level movements in an economy. The
monetarist have declared that the best way to control price level is to manipulate the
monetary variables and inflation will cease or at worse reduce. On the other hand, the
structuralists hold the opinion that inflation is mainly caused by structural bottlenecks, which
even go a step further in hampering the effectiveness and efficiency of the monetary variables
manipulation.
A number of works on the monetrist approach to inflation, have been carried out with
emphasis on the money supply as it affects inflation, and it has been found out that
controlling the money supply will to a large extent dampen the rate of inflation in Nigeria.
This thesis employed a reduced form of a model to provide an empirical insight into
the relationship between money supply, gross domestic product, budget deficit, exchange
rate, foreign prices and inflation using Nigerian data for the period 1970-1993.
The thesis has shown that although money supply, budget deficit, output level and
exchange rate affect the movements of the price level, of significance among them is the
impact of exchange rate on inflation in Nigeria for the period under study. When the impact
of all the variables on the price level where tested, their impact seemed to be swallowed up
by exchange rate alone indicating that the impact of exchange rate on the inflationary process
is very significant when combinis because the exchange rate played prominent role in pushing up the inflation rate in Nigeria
from the last half of the 1980s.
However, also of significance is the price level lagged suggesting that price mark-up
is a very important factor in price determination in Nigeria. Hence the thesis is concluded
on the note that although money supply and price level are positively related, the relationship
is not very strong and it could therefore not best explain the rising prices in the face of the
stringest economic and monetary measures of today. Government efforts should be geared
towards determining the main causal factors for correct policy formulation.ed with all the variables and under the period in view. This
Description
A THESIS SUBMITTED TO THE POST-GRADUATE
SCHOOL, AHMADU BELLO UNIVERSITY, ZARIA
IN PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD OF DEGREE OF MASTERS OF
SCIENCE (ECONOMICS)
DEPARTMENT OF ECONOMICS
AHMADU BELLO UNIVERSITY, ZARIA
FEBRUARY, 1999
Keywords
ASSESSMENT,, EFFECT,, MONEY,, SUPPLY,, NIGERIAN INFLATIONARY TRENDS, 1970-1993.