MONEY SUPPLY, INFLATION AND NIGERIA'S ECONOMIC GROWTH (1980 -1995)
MONEY SUPPLY, INFLATION AND NIGERIA'S ECONOMIC GROWTH (1980 -1995)
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Date
1998-09
Authors
AYASHAGBA, GABRIEL IORFA
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Abstract
Price stability and economic growth are two complementary phenomena
Macro-economic stability must be sustained in order to achieve a sustainable
economic growth. This implies that aggregate demand must be consistent with the
absorptive capacity of the economy. However, experience in Nigeria has shown
that fiscal policies intended primarily to stimulate economic growth has been a
source of macro-economic instability. Deficit budgets financed primarily by the
banking sector have been a major source of financial imbalances. The resultant
high inflation has powerful allocative and distributional effects on consumers and
investors, which are often detrimental to this growth process. Consequently, the
decision of maintaining monetary stability is a difficult one because of the uneasy
trade-offs. The Federal Government has become increasingly dependent upon
bank advances to pay wages and salaries and other material bills. Economic
upsurging is, therefore, associated with an expansion of credit, the downsurging
with a contraction.
The main objective of this thesis is to replicate tests identifying the line of
causality between the money supply and the rate of inflation using Nigerian data
and to show the implication of this causation of the growth of Nigeria economy
between the period 1980-1995. The methodology adopted is that of Granger and
the results show that there is a strong relationship between the money supply and
inflation with the line of causation being bi-directional, that is, from the money
supply to inflation and vice versa. Although such a bi-directional relationship exist
only for present values of the money supply and not for lag values. The effect of
the causal relationship between the money supply and the rate of inflation on the
growth of the gross domestic product is, however, not significant.
Description
A THESIS SUBMITTED TO THE POSTGRADUATE SCHOOL, AHMADU
BELLO UNIVERSITY, ZARIA IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF
SCIENCE (ECONOMICS), DEPARTMENT OF ECONOMICS, FACULTY OF
SOCIAL SCIENCES, AHMADU BELLO UNIVERSITY, ZARIA.
Keywords
MONEY,, SUPPLY,, INFLATION,, NIGERIA'S ECONOMIC GROWTH