Money Neutrality Controversy In A Developing Economy

Abstract

Money has always been a dominant factor in monetary policy. Money Neutrality Controversy in a developing economy is the main objective of this paper. The data were sourced from the CBN statistical bulletin, 2011. Various econometric techniques such as Phillips Perron, Johansen co integration, VAR test were used to test the stationarity of the time series variables, investigate co integration and estimation of variable on the economic growth in Nigeria. The results revealed that the GDP and money neutrality variable were stationary at I(0). There was at least two co-integrating equations and was normalized at TGE and MS. In addition, TGE has positive impact on GDP. Both MS and PRIC were found to have inverse relationship with the GDP. Finally, the MS granger caused GDP among the variables and informed short run relationship with economic growth in the developing countries.

Keywords: Unit root, PP-test, TGE, Monetary, GDP, VAR, Neutrality