I invite you to enjoy a wellpackaged literacy material. Pdf the relative effectiveness of fiscal and monetary. The trend between inflation and economic growth in nigeria the facts and figures obtained from the imf world economic outlook report 2011 revealed that the nigerias gdp tends to be low when the inflation rates are high apart from a few years of the 80s. Pdf effectiveness of monetary policy on inflation targeting. Louis introduction the question of the effectiveness of monetary policy is a longstanding issue in the literature of monetary economics and central banking.
If the economy is in the keynesian range, monetary policy is ineffective and fiscal policy is highly effective. Impact of monetary policies on inflation in nigeria 19801995. Kehinde, james sunday department of accounting and finance, faculty of management sciences, lagos state. This study examines the effect of anticipated and unanticipated monetary policy shocks on the effectiveness of monetary policy transmission mechanism in nigeria by estimating a stickyprice dynamic stochastic general equilibrium dsge model using bayesian estimation approach. The paper examined the relative effectiveness of fiscal and monetary policy instruments on economic growth sustainability in nigeria in order to determine the appropriate mix of both policies. Generally, this study will dwell on the overview of monetary policy situations in the nigerian economy. Essentially, it is a systematic study of the implications of monetary policy in nigeria, while paying attention to the peculiarities of the nigerian economy and using a rigorous uptodate framework. Pdf the effectiveness of monetary policy in the control of inflation. This study investigated the effect of fiscal policy on economic growth in nigeria. This paper empirical study the effectiveness of monetary and fiscal policy instruments in stabilizing nigerian economy from 1981 2015.
How to improve the effectiveness of monetary policy in the. This study examined the effectiveness of monetary policy on inflation targeting in nigeria between 1990 and 20, employing johansen cointegration and error. The impact of fiscal and monetary policy on nigerian. Pdf this study examined the effectiveness of monetary policy and control of inflation in nigeria. In examining the relative effectiveness of monetary and fiscal policies, andersen and jordan 1968 employed a dynamic econometric model and concluded that monetary policy is more certain, more effective and faster in influencing the economy in relation to fiscal policy. Monetary policy is a central banks actions and communications that manage the money supply. Effective monetary policy produces economic growth and development for a country such as nigeria. It is part of the central bank of nigerias efforts at promoting economic and financial literacy. The impact of monetary and fiscal policies on nigerian. Examine the effect of monetary policy on inflation in nigeria. The data were sourced from central bank of nigeria, national bureau of statistics and world development index wdi. The main objective is to analysis how various components of fiscal policy have contributed to the growth rate of the nigerian economy. In standard models that underpin flexible it policy fra meworks at most central banks, the financial sector does not play a large role in deriving the monetary policy conclusions.
Ajisafe and others published the relative effectiveness of fiscal and monetary policy in macroeconomic management in nigeria find, read and cite all the research you. Anyanwaokoro 1999 defines direct tools as those tools used by the central bank of nigeria to. Monetary policy and its effectiveness on economic development. Cbn effects of monetary new central bank of nigeria. Babajide, isibor areghan akhanolu and okafor tochukwu. An empirical analysis of effectiveness of monetary and fiscal policy instruments in stabilizing economy. This study is designed to empirically analyze the effectiveness of monetary policy as a tool for controlling inflation in nigeria. The effectiveness of monetary policy measures in controlling. An empirical analysis of effectiveness of monetary and fiscal policy.
Monetary policy and its effectiveness on economic development in nigeria. Monetary policy tools in the other hand are various toolsinstruments of monetary policy which are classified into two. Transmission of changes in money supply, say through open market operations, runs as follows, in the first step increase in money supply following the expansionary monetary policy leads to the fall in. Monetary policy refers to the credit control measures adopted by the central bank of a country. The economic environment that guided monetary policy before 1986 was characterized by the dominance of the oil sector, the expanding role of the public sector in the economy and over dependence on the external sector in order to maintain price stability and a healthy balance of payment position, monetary management depended on the rise of direct monetary instruments such as credit ceilings. Mallick 2008 showed that there is substantial evidence of the effectiveness of. Effectiveness of monetary policy in controlling inflation. The impact of fiscal and monetary policy on nigerian economic.
Benjamin ayodele folorunso, fiscal and monetary policy instruments and economic growth sustainability in nigeria, american journal of economics, vol. A monetary policy oriented to maintain price stability over the long term will contribute fully to improving economic outlook and to ensure social welfare. Zimbabwe has given fiscal policy the biggest role in economic stimulus given the multicurrency regime which has limited the role of monetary policy. In fact, in the intermediate range, the effectiveness of monetary and fiscal policies depends largely on the elasticities of the is curve. The effectiveness of monetary policy as a tool for. Hence, the main objective of this study is to empirically assess the effectiveness of monetary policy in the comesa region, with particular reference to zambia. In between these two extreme views are the synthesists who advocate the middle path. The most important of these forms of money is credit. A major shortcoming of monetary targeting is that its efficacy depends on a strong, predictable and reliable relationship between outputincome and base money. Evidence from subsaharan africa prepared by magnus saxegaard1 authorized for distribution by annemarie gulde may 2006 abstract this working paper should not be reported as representing the views of the imf. Monetary policy shocks and effectiveness of channels of. Effectiveness is investigated by considering some underlying assumptions.
This paper empirical study the effectiveness of monetary and fiscal policy instruments in stabilizing nigerian economy from 1981. Excess liquidity and effectiveness of monetary policy. The data was tested for stationarity using augmented dickey fuller adf test while the cointegration was conducted using johansens. The relative effectiveness of monetary and fiscal policy has been the subject of controversy among economists. Fiscalmonetary policy and economic growth in nigeria. The central bank of west african states bceao is conducting the single monetary policy with the main goal of preserving price stability and supporting economic growth.
Pdf relative effectiveness of fiscal and monetary policies. Alade deputy governor, economic policy march 2017 iii fiscal policy at a glance. Download this complete banking and finance project material titled. Pdf the study investigated effect of monetary policy on economic growth in nigeria. In view of the problems inherent in the nigeria monetary policy the researcher therefore recommend among other thing. On the other hand, if the is curve is elastic, monetary policy is more effective than fiscal policy. Therefore, it is recommended that the monetary authority in nigeria should regulate exr and ms in controlling inflation to achieve a shortterm result. The effectiveness of fiscal and monetary policy during the financial crisis besnik fetai see university, ilindenska bb, tetovo, fyrom abstract the objective of this paper is to assess the effectiveness of monetary and fiscal policy on economic growth during. Pdf an empirical analysis of effectiveness of monetary and.
The monetarists regard monetary policy more effective than fiscal policy for economic stabilisation. It was also observed that the effectiveness of monetary policy is controlling inflation party depends on the instruments and the prevailing economic environment. The data were sourced from central bank of nigeria, national bureau of statistics and world development index. While it is possible to have a long list of the benefits of financial inclusion to the economy, this study aims at determining the impact of financial inclusion on the effectiveness of monetary policy by means. This study uses secondary data which were obtained from the statistical bulletin of the central bank of nigeria cbn covering the period from 1985 to 2015.
Monetary policy in a simplified analysis amount to the determination of the optimal quantity of money or in a dynamic sense, the optimal rate of growth money stock in an economy. Ascertain the effect of monetary policy on cooperant factors in economic growth in nigeria. Monetary policy rate mpris effective in the long run. The effectiveness of monetary policy in nigeria abstract monetary policy is formulated side by side with banking policy and it relies majorly on financial programming which seek to ensure some consistencies among the macroeconomic variables in the nigeria economy. The fed implements monetary policy through open market operations, reserve requirements, discount rates, the federal funds rate, and inflation targeting. The west african economic and monetary union waemu is a currency union with a fixed exchange rate and limited capital mobility and, therefore, an independent monetary policy in the short run. Monetary policy is more effective in malaysia and singapore, while fiscal policy is more effective in. Effectiveness of monetary and fiscal policy explained with. Government policies can only be deemed successful if they impact positively on the production and distribution of goods and services. The purpose of the paper is to examine the effectiveness of fiscal policy instruments in zimbabwe on economic growth as the major target variable in the period 19802010. The findings will also inform contemporary question on the choice of monetary policy frameworks and instruments, a debate that is currently sweeping across several subsaharan african central banks. Some researchers argued that, monetary policy is an effective policy measure to achieve inflation targeting, these researchers include gbadebo and muhammed 2015, herberger 1978, mccallum and nelson 2010, graude and polan 2005.
Pdf the paper investigated the effectiveness of selected monetary policy tools in the control of inflation in nigeria. Our discussion will address i changing views of the role and effectiveness of monetary policy, ii inflation targeting as an effective monetary policy, iii monetary policy and shortrun output stabilization, and iv problems in implementing a shortrun stabilization. The effectiveness of monetary policy on the banking sector in nigeria with abstract, chapter 15, references and questionnaire. If the is curve is inelastic, fiscal policy is more effective than monetary policy. Usually, the programme attempts to estimate an optimum quantity of money consistent with the assumed targets for gross. For example, in 1998 gdp growth rate was relatively high amidst the.
The money supply includes forms of credit, cash, checks, and money market mutual funds. The effectiveness of fiscal and monetary policy during the. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in nigeria and how gdp growth responds to the monetary and fiscal policy. Effectiveness of monetary policy on inflation targeting in. The relative effectiveness of monetary and fiscal policy depends upon the shape of the is and lm curves and the economys initial position. The economic strategies and goals of the government can be gleaned from the economic recovery and growth plan ergp 20172020, annual budgets, the medium term economic framework, fiscal strategy papers and the stated monetary policy objectives of the central bank of nigeria cbn. Monetary policy involves the management of money, the supply of money and interest rate. One of the major policy instruments for monetary policy in nigeria is cbns. Monetary policies are effective only when economies are. This study employs the auto regressive distributed lag ardl model to ascertain the relative effectiveness of monetary and fiscal policies in nigeria using a quarterly timeseries from 19812012. Monetary policy and its role in macroeconomic stability.
Integrated inflation targeting another perspective from. Monetary policy as one of the tools of controlling money supply in an economy of a nation by. They suggested that there should be more emphasis and reliance on monetary policy for the purpose of economic stabilization in nigeria. Saxegaard 2006, discovered that excess liquidity weakens monetary policy transmission mechanism and thus the ability of monetary authorities to influence demand conditions in the economy is essential for the success of monetary policy. It is the demand side economic policy implemented by the government to achieve macroeconomic objectives like growth, consumption, liquidity and inflation. Abata, matthew adeolu department of accounting and finance, faculty of management sciences, lagos state university, ojo, lagos, nigeria dr.
For instance adeoye 2007 observed that the primary goals of monetary and fiscal policies is to maintain domestic price. Monetary policy and its effectiveness on economic development in. On the other hand, the keynesians hold the opposite view. Nigeria in recent times has been battling with falling exchange rate, high inflation, high level of unemployment and low productivity. Monetary policy and central bank of nigeria project. Pdf an empirical analysis of effectiveness of monetary and fiscal. Achieving a single monetary policy requires to define the instruments and procedures that are used. Central bank of nigeria shortterm monetary policy framework in nigeria before 2002, the central bank of nigeria had designed monetary policy in line with fiscal duration of one year monetary policy had always faced the problem of non committal to both intermediate and ultimate targets the optimal longterm policy was not consistent. This is accomplished through the empirical examination of the money demand function and empirical analysis of the monetary.
Our discussion will address i changing views of the role and effectiveness of monetary policy, ii inflation targeting as an effective monetary policy, iii monetary policy and shortrun output stabilization, and iv. To achieve economic stability, udude 2014 stated that there is a need to place priority on efficient monetary policy tools. In nigeria, monetary policy has been used since the central bank of nigeria cbn was saddled the. Effectiveness of monetary policy of the central bank of nigeria table of content chapter one 1. Pdf an empirical analysis of effectiveness of monetary. Monetary policy deals with the discretionary control of money supply by the monetary authorities in order to achieve the desired economic goals. The effect of fiscal policy on economic growth in nigeria. Coenan, orphanides, and wieland 2003 carried out a study on price stability and monetary policy effectiveness when nominal interest rates are bounded at zero for the european central bank.
In nigeria, monetary policy measures are used to control inflation and other macroeconomic. In nigeria, the monetary policy is the macroeconomic policy laid down by the central bank of nigeria. An econometric analysis of the monetary policy reaction. Apr 10, 2020 the three objectives of monetary policy are controlling inflation, managing employment levels, and maintaining long term interest rates. It is important to explain to what extent monetary policy is effective in influencing level of national output. The effectiveness of monetary policy in controlling inflation in nigeria with abstract, chapter 15, references and questionnaire. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in nigeria and how gdp growth responds to the monetary and fiscal policy shock.