DOES MONEY TELL US ANYTHING ABOUT INFLATION IN NIGERIA?

Michael Adebayo Adebiyi ()
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Michael Adebayo Adebiyi: Department of Economics, University of Lagos, Akoka-Yaba, Nigeria

The Singapore Economic Review (SER), 2007, vol. 52, issue 01, 117-134

Abstract: This paper seeks to establish whether or not monetary aggregatesM1andM2have useful information for forecasting inflation, other than that provided by inflation itself. The study is approached in two ways. First, it conducts forecasting experiments, using mean absolute percentage errors (MAPEs). It then evaluates whether each monetary variable improves the forecasts of a simple autoregressive (AR) (1) model of inflation or not. The study reveals that the MAPEs for all the variables are less than that of the benchmark AR (1) model. This implies that all the variables examined serve as important information variables for price movements.Also, from the inflation equation, the paper reveals that monetary aggregate(M2), Treasury bill rate, deposit rate and exchange rates are significant in the equation, therefore concluding that these variables provide useful information in predicting inflation in Nigeria.

Keywords: Inflation; monetary aggregates; forecasting; error correction model (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0217590807002592

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