The Effectiveness Of Monetary Policy In Achieving Price Stability In Nigerian Economy

The Effectiveness Of Monetary Policy In Achieving Price Stability In Nigerian Economy

Abstract

This study is to examine the part of financial policy in achieving price stability in Nigerian frugality and the objects are as follows; to examine the effectiveness of interest rate in achieving price stability in Nigerian frugality and also to examine the effectiveness of plutocrat force in achieving price stability.

The system applied in assaying data for this work are grounded on statistical at descriptive styles of analysis.( retrogression analysis was used to analyses the repliers opinion. The finding is that there’s significant relationship interest rate and affectation.

Eventually, a review of the Nigerian experience in financial operation shows that the interventionist policy station dominated financial operation in the first two and half decades after which an period of liberalization and deregulation of fiscal sector followed. Only a sustained stable macroeconomic terrain and a sound vibrant fiscal system can propel the frugality to achieve her renaissance development pretensions.

Chapter One

Preface

exploration on effectiveness of financial policy on profitable variables in Nigerian frugality has for long been of interest to economist and policy makers still, studies have been carried out on certain aspects of profitable variables. These studied are stingy and in any case, not covering the effectiveness of financial policy of price stability in Nigeria, which now needed this exploration work.

An issue which has enthralled the minds of government for decades is the effectiveness of financial policy in impacting price stability despite the lack of agreement among economist on how it actually works and on magnitude of its effect on the frugality, there’s a remarkable strong agreement that financial policy has some measure of effect on the frugality( Udegbunam 2003).

Monetary policy refers to the combination of measures designed to regulate the value, force and cost of plutocrat in an frugality, in consonance with the position of profitable exertion. It can be described as the art of controlling the direction and movement of financial and credit; installations in performance of stable price and profitable growth In an frugality( CBN, 1992).

In ultramodern economics, the central bank is the authority with the accreditation to manipulating financial policy instruments to achieving asked macroeconomic objects.

still, the primary ideal of financial policy cuts across the authorizations of utmost central banks is the conservation of price stability which is imperative to the attainment of sustainable growth is the focus of these objects which is specified in the CBN ACT of 1958.

– Issue of legal currency notes and coins Maintain Nigeria external reserve

– To guard the transnational value of the legal tender currency.

– Promoting financial stability and a sound fiscal system.

– Act as banker and fiscal counsel to the civil government.

– Act as a lender of last resort.

The pursuit of price stability always implies the circular pursuit of other objects similar as profitable growth which can only take place under conditions of price stability and allocative effectiveness of the fiscal requests, since affectation is generally considered as purely a financial miracle with significant cost to the frugality. The primary thing of financial policy is to insure that plutocrat force is at a position that’s harmonious with the growth target of real income similar that non- inflationary growth will be assured. The pursuit of price stability through financial policy thus encompasses all main areas in which the Central Bank can contribute towards stabilizing the macroeconomic terrain of the country.

Statement Of The Problem

Central bank of Nigeria( CBN) has been the sole player in using financial policy in achieving price stability. Central bank of Nigeria has failed to achieve price stability due to the following

– Lack of agreement on what constitute price stability. For illustration, Shiratsuka( 1997) provides three description of price stability as follows

– A tolerable target for affectation rate( if achieved assumes the attainment of the price stability ideal)

-Sustainable growth underprice’ stability, inferring price stability is achieved at the affectation jalopy harmonious with sustainable profitable growth.

– Stability of affectation anticipation

– Moreso, political insecurity has also been attributed to one of the problem defying central bank of Nigeria( CBN) in achieving price stability through the use of financial policy.

Aim And Objects Of The Study

The end of this study is to carry out an indepth assessment of the effectiveness of financial policy in achieving price stability in Nigeria frugality. To this end, this study will probe whether financial policy will help in achieving price stability.

The objects of the study are as follows

a) To examine the effectiveness of interest rate In achieving price stability in Nigeria frugality

b) To examine the effectiveness of plutocrat force In achieving price stability in Nigeria frugality.

Exploration Questions

i) What will be the effectiveness of interest rate ill achieving price stability in Nigeria frugality?

ii) Will plutocrat force affect price stability ill Nigeria frugality?

iii) What will be the effectiveness of interest rate and plutocrat force in achieving price stability in Nigeria frugality?

iv) What will be the effectiveness of interest rate and plutocrat force in achieving price stability in Nigeria frugality?

v) Will inflationary rate affect the profitable growth of Nigeria frugality?

vi) What will be the effectiveness of interest rate and plutocrat force in achieving profitable growth in Nigeria frugality?

Significance Of The Study

To assess the effectiveness of financial policy on price stability in Nigeria frugality. This study will reflect the effectiveness of financial policy towards profitable growth.

The benefits to be deduced from this study will help the policy makers to fine- tune strategies regarding financial policy, how the plutocrat should be circulated in frugality. Other people that also benefits from this exploration work include preceptors, musketeers and associates in the field of studiesetc.

Exploration Thesis

The exploration thesis are as follows

thesis 1

Ho There’s no significant difference between interest rate and affectation rate.

HA There’s significance difference between interest rate and affectation rate.

thesis 2

Ho There’s no significance difference between plutocrat force and affectation mate.

HA There’s significance difference between plutocrat force and affectation rate.

thesis 3

Ho There’s no significance difference between interest rate, plutocrat force and affectation rate.

HA There’s significance difference between interest rate, plutocrat force and affectation rate.

Exploration Methodology

The exploration methodology is specifically designed to carry out effectiveness of financial policy on price stability in Nigeria frugality for the once seventeen times( 17 yrs) 1993- 2009.

In this regard, the sources of data are principally grounded on secondary sources of data collections.’ These are in the form of domestics, statistical exploration findings similar as Central Bank of Nigeria( CBN) review etc while retrogression( OLS) will be used to break the collection data. The methodology shall be descriptive and qualitative.

Model Specifications

Model I

Inf Rat = βo 1 INTt Et

INFt = Affectation Rate

Where βo-Constant

β1 = Parameter of the Equation

INTt = Interest Rate

Et = Error of Stochastic Term in Time T

Compass Of The Study

The compass of the study shall cover the effectiveness of financial policy in achieving price stability in Nigerian frugality development during the period 1993- 2009.

Limitation Of The Study

The perceived limitations are as follows

a) The possibility of getting the applicable data and the information for the purpose of the exploration work.

b) The vacuity of fund for the exploration work is another constraint.

c) Time constraint is another limitation as the exploration work is combined with the academic work in academy as a final time pupil.

Description Of Terms

plutocrat It’s anything that’s general respectable as a medium of exchange, store of value.

Monetary policy Is an instrument that Central Bank of Nigeria uses to control the rotation and plutocrat force in an frugality.

Affectation It’s continuity Increase In price of goods and services.

Stability When there’s a fixed price for particular goods and services.

Association Of The Study

This study will be structured into five( 5) chapters. Chapter one will examine the introductory aspect of the study containing the background of the study, statement of problem, end and objects, exploration questions, exploration thesis, exploration methodology, significance of the study, limitations of the study and association of the study. Chapter two will contain the review of applicable literatures. Chapter three will concentrate on the structural analysis. Chapter four will examine the data analysis, donation and interpretation of the results findings. Chapter five will concentrate on the summary, findings, recommendations and conclusion then the references.

References

WilliamJ. McDonough, President Federal Reserve Bank of New York A Framework Work for the Pursuit of Price Stability.( 2004)

B.A. Oke( 1995) The Conduct of Monetary Policy by the Central Bank of Nigeria( CBN)

Central Bank of Nigeria( CBN) Annual Report and Statement of Account for the Year Ended 31st December, 2006.

Central Bank of Nigeria( CBN) Economic and Financial Review Vo1.38No. 2 Affectation Targeting A Monetary Policy Management Framework for the Attainment of price Stability in Nigeria byDr.O.A. Uchendu.

L. Jhigan( 2002); Macro Economic Theory 11th Edition Revised Edition.