Monetary Policy and Economic Stabilisation in Nigeria; 1986 – 2019; (Distributional Koyck Lag Model Approach)
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This study examined the relevance of Monetary Policy in stabilizing the Nigerian Economy for the period (1986-2019); using the Koyck Model, regression. The results obtained reveal that the rate of growth in the money stock has significant impact on output, contrary to its impact on inflation. Changes in money supply did not exert significant influence on the lending interest rate; however operating lag period of money stock on interest rate was instantaneous. The lending interest rates were exogenously determined by lending institutions. Lending interest rates influenced investment significantly, though with a very long operating lag period. The immediate past value of Money supply significantly influenced the succeeding inflation rate and investment. Likewise, inflation caused growth in the gross domestic output. The joint influences of money stock and national output impacted significantly on the general price level. Consequently, monetary policy measures through adjustments in money stock were better in stabilizing growth than Inflation. Measures that make cash directly available to economic units stimulated investment.Based on the results of this study,we recommend that; the growth of Money Supply cannot be used to influence the general price level and the lending Interest Rate especially in the short run. Changes in the stock of Money Supply can be used to stimulate Economic Growth. Inflation can better be managed with proportionate growths in Money Supply and the Gross Domestic Product. Investment can be tracked by manipulating the lending interest rate.
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