THE MONETARY FACTORS IN THE INFLATIONARY PROCESS IN NIGERIA: 1969-1989
THE MONETARY FACTORS IN THE INFLATIONARY PROCESS IN NIGERIA: 1969-1989
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Date
1991-11
Authors
SAMUEL, DAVID ADEBISI
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Abstract
The relative importance of the monetary policy vis-avis
the fiscal policy in controlling the economic variables
has generated a lot of debate and contention in the economic
discipline. Of recent again, is the debate between the
monetarists and structuralists of the best way to tame the
price level movements in an economy. The monetarists have
come out to say that the best way to put the price level
under control is to manipulate the monetary variables and
inflation will cease, or at worse, reduce. On the other
hand, the structuralists do not completely agree with the
stance, and that inflation is majorly caused by the
structural bottlenecks, which even go a step further to
hampering the success of the monetary variables'
manipulation. The two of them seem to be talking some
sense, but which is more appropriate for the Nigerian
setting is the main issue.
A number of work on the monetarist approach to
inflation have been carried out and with emphasis on the
money supply as it affects inflation, and it has been found
that controlling the money supply and the attached monetary
variables will, to a large extent, moderate inflation rate
in Nigeria.
The thesis employed a reduced form of a model to
provide the empirical insight into the relationship between
money supply, Gross Domestic Product, the budget deficit,
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exchange rate, foreign price and inflation, using Nigerian
data for the period 1969-1989.
The thesis has shown that money supply significantly
affects the movements of the price level. It shows also
that the budget deficit, output level, and exchange rate
affect the price level. Noteworthy is the impact of money
supply on inflation in the 1970s, when the revenue from oil
was highly monetized.
Testing the impact of all the variables on the price
level, they tend to be swallowed up by the money supply
variable. But when their impacts are tested singly, they
seem to perform better. The impact of exchange rate on the
inflationary process has not been very significant when
combined with all the variables and under the period in
view. This is because the exchange rate became significant
in the last half of the 1980s.
When the explanatory variables are regressed upon by
the price level, they tend to perform better than when
inflation, as defined, is regressed on their changes. The
implication of this is that the monetary variables are
significant in price determination but do not contribute to
inflationary process as much. Therefore, some other factors
might have been responsible for the changes in the price
levels which might not be wholly monetary.
Hence, the work was concluded on the note that the
monetary factors do not significantly affect inflation, and
that government efforts should be geared towards determining
the main causal factors for correct policy formulation.
Description
A THESIS SUBMITTED TO THE POSTGRADUATE SCHOOL,
AHMADU BELLO UNIVERSITY, ZARIA, IN PARTIAL
FULFIIHENT OF THE REQUIREMENTS FOR THE
DEGREE OF MASTER OF SCIENCE (ECONOMICS),
DEPARTMENT OF ECONOMICS, FACULTY OF ARTS AND
SOCIAL SCIENCES, AHMADU BELLO UNIVERSITY, ZARIA
NOVEMBER, 1991
Keywords
MONETARY,, INFLATIONARY,, PROCESS,, NIGERIA