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Title:Monetary dimension of the Nigerian economic crisis: empirical evidence from a cointegration paradigm
Author:Bogunjoko, Julius O.ISNI
Periodical:The Nigerian Journal of Economic and Social Studies
Geographic term:Nigeria
Subjects:monetary policy
economic recession
Abstract:This article examines the efficacy of Nigeria's monetary policy as a stabilization tool within the emerging popular cointegration theory. The empirical analysis covers the period 1970-1993. The stationarity tests of macroeconomic variables, except for the output determinants, suggest that estimations based on their levels may be spurious and could misguide policy decisions. The results of the study suggest that the contemporaneous contribution of money to the inflationary cycle is weak, but that its one-year lagged value is strong and significant. While the role of fiscal deficit is pervasive, the study confirmed the inflationary effect of the exchange rate factor, with the parallel exchange rate being the most relevant target for policy. Both the structural adjustment programme (SAP) and the economic recession were potential sources of inflation. The output model confirms that money is important and that the appropriate monetary target is domestic credit to the private sector. Similarly, there is ample evidence to support the monetary approach to balance of payments in Nigeria. The study casts doubt on the efficacy of economy-wide deregulation as proposed by the World Bank and suggests a selective deregulation procedure instead. While the existence of a long-run structural relationship among some macroeconomic variables cannot be denied, the feedback mechanism in the economy is generally slow. Bibliogr., notes, sum.