Modelling Policy Options for Nigeria: Fiscal Responsibility, Monetary Credibility, and Regional Integration

Xavier Debrun, Paul Masson and Catherine Pattillo

Chapter 4 in Economic Policy Options for a Prosperous Nigeria, 2008, pp 93-120 from Palgrave Macmillan

Abstract: Abstract As in many other developing economies, establishing a low inflation environment has been a challenge in Nigeria; and ways to improve the formulation and implementation of monetary policy have been at the forefront of the policy debate. An array of institutional reforms expected to foster the credibility of a commitment to price stability could potentially be envisaged. In this chapter, we focus on two alternative reform paths currently under discussion, namely the formation of a monetary union with neighbouring countries, and strengthening the independence of the Central Bank while keeping a national currency. In contrast to most of the existing literature, our analysis is based on a model that incorporates two types of distortions leading to excessive inflation: the desire to stimulate out-put and the need to finance government spending. The model clarifies how the two specific policy frameworks considered here might remedy those problems. While both options can potentially yield significant credibility gains, the analysis points to the importance of capitalizing on the recent record of improved fiscal discipline. Specifically, structural fiscal reforms that would improve expenditure efficiency, and preclude interference between the conduct of monetary policy and public finances, appear to deliver significant credibility gains.

Keywords: Monetary Policy; Central Bank; International Monetary Fund; Monetary Union; Institutional Reform (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:pal:palchp:978-0-230-58319-1_5

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230583191

DOI: 10.1057/9780230583191_5

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().