Impact of Inflation and Monetary Policy Stabilisation on Economic Growth Performance in Nigeria

Abstract

Generally, both fiscal and monetary policies seek at achieving relative macroeconomic stability through maintaining stable prices or low and stable inflation. In the light of this, this study empirically investigates the impact of inflation and monetary policy on economic growth performance in Nigeria with the use of econometric technique - O L S method using time series data from CBN statistical bulletin from 1981-2008. The results revealed that although money supply is positively related to economic growth performance, but the result is however insignificant in the case of GDP growth rates on the choice of inflation rate has no significant impact on economic growth performance. This study reveals that monetary policy alone is incapable of controlling inflation. It should therefore be supplemented by fiscal measures, non monetary and non fiscal measures. Fiscal measures are highly effective for controlling government expenditure, personal consumption expenditure, and private & public investment. The study therefore recommends that the Central Bank of Nigeria needs to deal with monetary policy in a more transparent manner so as to address the issues of expectations as inflation exhibits a high degree of inertia.

Keywords: Monetary policy stabilisation; inflation; economic performance; Nigeria.