Reationship between Inflation, Money Supply, Interest Rate and Income Growth (Rgdp) in Nigeria 1980-2010. an Empirical Investigation.

Abstract

This paper attempts to examine the relationship between money supply, interest rate, income growth and inflation rate in Nigeria for the period 1980-2010. The paper employed a cointegration method, VAR, and Granger causality test to examine the relationship among the variables. Based on this approach, the paper found that there is no long run relationship among the variables and granger causality test shows a bidirectional relationship between money supply and inflation, income growth and inflation and interest rate and inflation. The granger causality test also revealed that money supply, interest rate, and income growth all granger cause inflation. Based on these findings, this study recommends appropriate control and management of money supply, interest rate and inflation rate.

Keywords; Inflation rate, Money Supply, Interest rate, Income growth, Cointegration, Granger Causality test.