THE ROLE OF MONETARY POLICY IN THE MANAGEMENT OF INFLATION IN NIGERIA

THE ROLE OF MONETARY POLICY IN THE MANAGEMENT OF INFLATION IN NIGERIA (ECONOMICS PROJECT TOPICS AND MATERIALS)

ABSTRACT

Monetary policy consists of discretionary measures designed by monetary authorities to regulate and influence the supply, cost and direction of money and credit provided to the economy. This aspect of macroeconomic policy remains one of the cornerstones of economic policy formulation and implementation. Monetary policy is relevant irrespective of the economic framework in place.

With the adoption of the inflation, this study examine the impact of monetary policy in Nigeria using econometric techniques, a model that captures the impact of inflation on monetary policy is specified and estimated using the techniques of Ordinary Least Square for the period of 1985-2008.

The main findings emerging in this study indicated that the demand for money has an inverse relationship between the level of interest rates and inflationary rates. The study also advocated for the inclusion of partial adjustment scheme while modeling money demand functions and hence monetary policy in Nigeria.

CHAPTER ONE

1.1     INTRODUCTION

Monetary policy plays a very crucial role in any economy, being the channel through which financial resources flow from one segment of the economy to the other. It, therefore, represents the major foundation of the modern market economy. Essentially, there are three pivotal roles for the monetary policy namely; the Monetary Policy role, the financial stability role and the overall economic role. Monetary policy in the current Nigeria context, encompasses actions of the central bank that affect the cost and availability of commercial and merchant bank’s reserve balances and thereby the overall monetary and credit conditions in the economy (Akaku, 1993) .The primary goal of such actions is to ensure that overtime, the expansion in money and credit will be adequate for the long run need of the growing economy at stable prices.

The short-run objective of monetary policy however include, combating inflationary pressure, restoring a sustainable balance of payment, attainment of full employment level of resources, equitable distribution of income, maintaining a stable exchange rate at internationally competitive level . Sometimes, changes in monetary are undertaken as part of concerted actions to remove obstacles to the growth of savings and efficient allocation of investment.

THE ROLE OF MONETARY POLICY IN THE MANAGEMENT OF INFLATION IN NIGERIA (ECONOMICS PROJECT TOPICS AND MATERIALS)