MONETARY POLICY AND INFLATION MANAGEMENT IN NIGERIA: AN ARDL APPROACH

Michael S OGUNMUYIWA, Olufemi Joseph BABATUNDE

Abstract

This paper examined the impact of money policy on inflation in Nigeria using monthly data  from January 2010 to October 2016  (2010:01 – 2016:10) on inflation rate, interest rate, exchange rate, narrow money and broad money obtained from Central Bank of Nigeria Statistical Bulletin.  The ARDL model was used to ascertain the existence of long and short run equilibrium conditions. The unit roots test showed that exchange rate, broad money supply and Inflation were stationary at levels while narrow money and Interest rate were stationary at first difference. The results showed that narrow money and interest rate have positive and significant impact on inflation in Nigeria both in the short run and long run. The study affirmed that there was long run relationship between monetary policies and inflation in Nigeria. The conclusion of the study is that monetary policy variables have significant impact on inflation in Nigeria, both in the short and long run. It was recommended that interest rate should be regulated in order to control the rate of inflation in Nigeria.

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