Premium times july 1, 2019 understanding nigerias monetary policy, by uddin ifeanyi 20190701t08. Economic growth in the third quarter of 2017 was positive for the second. The objective of fiscal policy is to maintain the condition of full employment, economic stability and to stabilize the rate of growth. The effect of fiscal policy on economic growth in nigeria.
Monetary policy is the process by which monetary authority of a country controls the money supply, interest rates, lending rates and other monetary rates in order to ensure price stability, contribute to. Equations of the monetary policy reaction model are specified and discussed in section 4, while sections 5 and 6 discuss the estimation results and preliminary policy. Objectives and targets of monetary policy in nigeria in nigeria, the major objectives of policy are the attainment of price stability and sustainable economic growth. The fiscal policy is designed to ensure full employment, but many nigerians know that such is far from being released since the time of establishment of the policy. Monetary policy addresses interest rates and the supply of money in circulation, and it is. The first view calls for monetary policy to achieve price stability, while the second view seeks to achieve price stability and other macroeconomic objectives. To discuss how nigeria can attain desired macroeconomic outcomes through harmonization of fiscal and monetary policies in nigeria, we. An econometric analysis of the monetary policy reaction function in nigeria 1 1 1. Overall, the socioeconomic and political milieu, including the legal framework under which the central bank of. Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very shortterm borrowing or the money supply, often targeting inflation or the.
Monetary and fiscal policy are tools that government implement to stabilise the. Monetary policy involves the management of money, the supply of money and interest rate. May 05, 2020 both monetary and fiscal policy are maroeconomic tools used to manage or stimulate the economy. Monetary policy refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth. This paper assesses how fiscal and monetary policies influence economic growth and. Pdf the fiscalmonetary policy and economic growth in nigeria. Fiscal policy is the means by which a government adjusts its level of spending in order to monitor and influence a nations economy. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in nigeria and how gdp growth responds to the monetary and fiscal policy shock. The main objective is to analysis how various components of fiscal policy have contributed to the growth. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective. The nigerian economy is slowly exiting recession but remains vulnerable. Introduction during the 1980s and 1990s, the vulnerability of emes to shocks was often exacerbated by high fiscal deficits. Measured against fiscal policy, monetary policy is said to be quicker at.
The first view calls for monetary policy to achieve price stability, while the second view seeks to achieve. Monetary policy increases liquidity to create economic growth. We simply used descriptive statistics to show contribution of government fiscal policy to economic growth, and to ascertain and explain growth rates, and an ordinary least square ols in a multiple form to ascertain the relationship between economic growth and government expenditure. The evidence indicates that monetary and fiscal policies in nigeria. Fiscal policy must be designed to be performed in two waysby expanding investment in public and private enterprises and by diverting resources from socially less desirable to more desirable investment channels. Meanwhile, the international monetary fund imf says nigerias elevated fiscal deficits rely on central bank financing which complicates monetary policy. Harmonization of fiscal and monetary policies in nigeria by ayo. Central bank of nigeria monetary policy department fiscal policy at a glance explains fiscal policy and related concepts using graphical illustrations.
Fiscalmonetary policy and economic growth in nigeria hrmars. This except one was highly significant in reducing the level of unemployment generation in nigeria than monetary. Also, okafor, 2012 in his study tax revenue generation and nigeria. That includes credit, cash, checks, and money market mutual funds. Generation and nigeria economic development analyzed the monetary and fiscal policy implication nigerias full employment level. Fiscal measures are frequently used in tandem with monetary policy to achieve certain goals. Fiscal policy, measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes and government expenditures. Some of the major instruments of fiscal policy are as follows. The impact of fiscal policy on the nigeria economy economics. Rationale for coordination between fiscal and monetary policy.
We simply used descriptive statistics to show contribution of government fiscal. Monetary policy and its effectiveness on economic development in nigeria author. Objectives and targets of monetary policy in nigeria. Fiscal policy is defined as the means by which a government adjusts its levels of spending to monitor and influence a nations economy reem, 2009. Generally, this study will dwell on the overview of monetary policy situations in the nigerian economy. Overall, the socioeconomic and political milieu, including the legal framework under which the central bank of nigeria has operated, was found to be the critical factor that influenced the outcome of monetary policy. The impact of fiscal and monetary policy on nigerian economic.
However, on the other hand, all the fiscal variables significantly reduced unemployment in nigeria. The impact of fiscal and monetary policy on nigerian economic growth. It is the demand side economic policy implemented by the government to achieve macroeconomic objectives like growth, consumption, liquidity and inflation. Fiscal policy is used in order to compliment the effect of monetary policy of the central bank of nigeria cbn. Difference between fiscal policy and monetary policy. This paper discusses the evolution of monetary policy in nigeria in the past four decades. Central bank of nigeria, monetary policy department. Introduction m onetary policy outcomes vary greatly depending on both the target and instrument in use. Economic sustainability and the role of fiscal and. Evaluating the relative impact of monetary and fiscal policy in. In the case of nigeria, ajayi 1974, ajisafe and folorunso 2002 and adefeso and mobolaji 2010 found that monetary policy impacted greater influence than fiscal policy while olaloye and ikhide 1995. It is used in conjunction with the monetary policy implemented by central. Ascertain the effect of monetary policy on cooperant factors in economic growth in nigeria.
Understanding nigerias monetary policy, by uddin ifeanyi. With the end of the civil war in 1970, which disrupted economic activities and an upsurge in wages due to revenues from the oil boom, inflationary trends were noticed in the economy. Rising oil prices, new foreign exchange fx measures, attractive yields on government securities, and a tighter. Fiscal policy, public debt and monetary policy in emes. This study reveals that for the nigerian economy fiscal policy is more. According to reem 2009, fiscal policy is based on the theories of british econ.
This is contrary to persuasive monetary policy advice for inflation targeting. Ascertain the effect of monetary policy on cooperant factors in. Monetary and fiscal policy coordination central bank of nigeria. If the monetary policy have been effectively used, there will be low inflationary trend in the. The budget of a nation is a useful instrument to assess the fluctuations. Monetary and fiscal policy interactions in nigeria. The implementation of fiscal policy is essentially routed through governments budget.
Introduction during the 1980s and 1990s, the vulnerability of emes to shocks was often exacerbated by high fiscal deficits, underdeveloped domestic bond markets, and largecurrency and maturity mismatches. Pdf on feb 29, 2016, joseph bidemi obayori and others published fiscal policy and unemployment in nigeria find, read and cite all the research you need on researchgate. The article examines the nature of fiscal policies in nigeria using vector autoregression var model. Fiscal policy is managed by government of any country by cutting or expanding collection of revenue through direct and indirect taxes influencing spending of. Fiscal policy, public debt and monetary policy in emerging. An econometric analysis of the monetary policy reaction. The fundamental problem of any government is it economic or otherwise its implementation. Jul 01, 2019 premium times july 1, 2019 understanding nigerias monetary policy, by uddin ifeanyi 20190701t08. Monetary policy and price stability in nigeria december. The policy is used along with monetary policy in different combinations to direct a countrys goals.
An international monetary fund imf staff team led by amine mati, senior resident representative and mission chief for nigeria, visited lagos and abuja from september 25 to october. The publication is aimed at enhancing the knowledge base of users by compiling the concepts and explaining them in a unique, simple and reader. Rising oil prices, new foreign exchange fx measures, attractive yields on government securities, and a tighter monetary policy have contributed to better fx availability, increased reserves to a fouryear high, and contained inflationary pressures. This is the most important objective of monetary policy in nigeria. In nigeria, the monetary policy is the macroeconomic policy laid down by the central bank of nigeria. Monetary policy and price stability in nigeria december 2006 through february 2012. In the case of nigeria, ajayi 1974, ajisafe and folorunso 2002 and adefeso and mobolaji 2010 found that monetary policy impacted greater influence than fiscal policy while olaloye and ikhide 1995, philip 2009 and medee and nenbee 2011 argued that fiscal policies are more crucial for economic growth in the country. Monetary policy and central bank of nigeria project. Thesis in depart ment of economics, obafemi awolowo. Jan 27, 2020 fiscal policy is how congress and other elected officials influence the economy using spending and taxation.
Monetary policy and price stability in nigeria december 2006. This article aims at determining the impact of various components of fiscal policy on the nigerian economy. The purpose of the nigerian fiscal policy is divided into two. The central bank of nigeria, like other central banks in developing countries, achieve. Top 8 objectives of fiscal policy economics discussion. Fiscal policy is how congress and other elected officials influence the economy using spending and taxation. Pdf welfare effects of fiscal and monetary policy in nigeria. Specifically, the existence of fiscal dominance, a persistent liquidity overhang, an. It is used in conjunction with the monetary policy implemented by central banks, and it influences the economy using the money supply and interest rates. However, the relative effectiveness of these policies is an issue that has continued to generate both academic and policy interests. This study investigated the effect of fiscal policy on economic growth in nigeria. The past 10 years have been characterized by an average growth rate of.
Associated objectives are those full employment and stable longterm interest rates and real exchange rates. Monetary policy is the process by which monetary authority of a country controls the money supply, interest rates, lending rates and other monetary rates in order to ensure price stability, contribute to economic growth, lower employment, maintain predictable exchange rates and ensure general trust in the currency. An application of a statespace model with markov switching. If the monetary policy have been effectively used, there will be low inflationary trend in the economy, there by increasing or enhance the purchasing power of the citizens. Measured against fiscal policy, monetary policy is said to be quicker at resolving economic shocks uniamikogbo and enoma, 2001. Fiscalmonetary policy and economic growth in nigeria. Monetary policy addresses interest rates and the supply of money in circulation, and it is generally. Both monetary and fiscal policy are maroeconomic tools used to manage or stimulate the economy. A decade later, perspectives on the effectiveness of monetary policy had changed. Fiscal and monetary policy instruments and economic growth. The objectives of monetary policy may vary from country to country but there are two main views. Fiscal and monetary policy and economic growth in nigeria.
Monetary policy is a central banks actions and communications that manage the money supply. The study examined the empirical link on the effect of fiscal and monetary policy on the economic growth of nigeria 19862010. Monetary policy and central bank of nigeria project topics. Chuku 2010 used quarterly data to explore the monetary and fiscal policy interactions in nigeria between 1970 and 2008. Central bank of nigeria shortterm monetary policy framework in nigeria before 2002, the central bank of nigeria had designed monetary policy in line with fiscal duration of one year monetary policy had. With the end of the civil war in 1970, which disrupted economic activities and an upsurge in wages due to revenues from the oil. Fiscal and monetary policy and its effect on the growth of nigeria. The most important of these forms of money is credit. Central bank of nigeria shortterm monetary policy framework in nigeria before 2002, the central bank of nigeria had designed monetary policy in line with fiscal duration of one year monetary policy had always faced the problem of non committal to both intermediate and ultimate targets the optimal longterm policy was not consistent. Fiscal policy must be designed to be performed in two waysby expanding investment in public and private enterprises and by diverting resources from socially less desirable to. Pdf fiscalmonetary policy and economic growth in nigeria. Babajide, isibor areghan akhanolu and okafor tochukwu subject.
No one is asking for the unrealizable goal of full employment for all. The objective of fiscal policy is to create healthy economic growth. The impact of fiscal and monetary policy on nigerian. Apr 16, 2020 monetary policy is a central banks actions and communications that manage the money supply. Monetary policy and its effectiveness on economic development. The fed what is the difference between monetary policy. It is used along with the monetary policy which the central bank uses to influence money supply in a nation. Harmonization of fiscal and monetary policies in nigeria. Adefeso and others published the fiscalmonetary policy and economic growth in nigeria. Monetary policy, growth, development, optiaml rate, foreign investment created date. Examine the effect of monetary policy on inflation in nigeria. This is contrary to persuasive monetary policy advice for inflation targeting pursued by central banks and the international monetary fund imf.
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