Macroeconomic Analysis of the Relationship between Monetary Policy Instruments and Inflation in Nigeria (Published)
This study examined the role of monetary policy instruments in controlling inflation in Nigeria. The study adopted interest rate, minimum rediscount rate, liquidity ratio, and cash reserve ratio as proxy for monetary policy instruments and the independent variables. These were regressed against inflation rate, the dependent variable. Secondary time series panel data for the period covering 1982 to 2011, were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin in 2011. The study employed multiple regression technique based on E-views 7 computer software to analyze data obtained on the study variables. Four hypotheses were tested and the null hypotheses were accepted based on the regression results. The study found that interest rate, minimum rediscount rate, liquidity ration and cash reserve ratio had no significant influence on inflation. The study recommended that Nigeria shift from being a consumption driven (import) economy to production based (export) economy for the impacts of these policies to achieve desired results.
Keywords: Cash Reserve Ratio, Inflation, Liquidity Ratio, Minimum rediscount rate, Monetary Policy