Monetary Policy and Macroeconomic Instability in Nigeria: A Rational Expectation Approach
Feridun, M.,,
Abiodun Folawewo and
Tokunbo Osinubi ()
Applied Econometrics and International Development, 2005, vol. 5, issue 2
Abstract:
Generally, both fiscal and monetary policies seek at achieving relative macroeconomic stability. Based on countries’ experience on the role of monetary policy in controlling economics instability, this study examines the efficacy of monetary policy in controlling inflation rate and exchange rate instability. The analysis performed is based on a rational expectation framework that incorporates the fiscal role of exchange rate. Using quarterly data spanning over 1980: 1 to 2000: 4, and applying time series test on the data used, the paper shows that the effort of monetary policy at influencing the finance of government fiscal deficit through the determination of the inflation-tax rate affects both the rate of inflation and the real exchange rate, thereby causing volatility in their rates. The paper reveals that inflation affects volatility of its own rate as well as in the rate of real exchange. The policy import of the paper is that monetary policy should be set in such a way that the objective it is to achieve is well defined.
Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed
Downloads: (external link)
http://www.usc.es/economet/reviews/aeid524.pdf
No
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eaa:aeinde:v:5:y:2005:i:2_4
Ordering information: This journal article can be ordered from
http://www.usc.es/economet/info.htm
Access Statistics for this article
More articles in Applied Econometrics and International Development from Euro-American Association of Economic Development
Bibliographic data for series maintained by M. Carmen Guisan ().