The Impact Of Monetary Policy Measures As An Instrument Of Economic Stabilization In Nigeria

The study examined the impact of monetary policy in stabilizing the Nigeria economy. In the model specified inflation is the regress while cash research requirement, liquidity ratio, money supply, minimum rediscount rate, interest rate are the regressors. The government employs a deliberate manipulation of cost and availability of credit and money to achieve this economic objective. The CBN being the sole regulatory body combines measures designed to regulate the value, supply and cost of money into economic activities. This is what we call monetary policy (CBN Brief 1996/03). It is against this background that the research is carried out to ascertain the effect in the use of monetary policies such as money supply, interest rate, liquidity ratio, minimum rediscount rate, inflation rate and cash reserve requirement to stabilize the Nigeria economy. Also to determine the relationship that exists between the independent variables and dependent variable from the secondary data for the period under study (1985 - 2015). The statistical technique that will be used for this analysis is the ordinary least square technique, with the aid of PC five 8.00 software package. It has been identified that the major problem militating against the poor performance of monetary policy instruments in stabilizing the economic in Nigeria is time – lags which involves policy employed to take many months to achieve its full effects. This research recommends that there should be a reduction in the cost of production and increase the exportation in order to achieve the objectives of naira devaluation in Nigeria and also, central banks should be independent and should be able to achieve its inflation targets and the stabilization of growth rate in money supply.

TABLE OF CONTENTS

Title page i

Certification page ii

Dedicationiii

Acknowledgementiv

Abstractv

Table of contents vi

CHAPTER ONE

1.1 Background of the study 1

1.2 Statement of problem 3

1.3 Statement of objectives 3

1.4 Statement of hypothesis 4

1.5 Research Question4

1.6 Significance of the study 5

1.7 Scope and limitation of the study 5

1.8 Definition of terms 6

CHAPTER TWO

2.0 Literature Review - - - - - - - 7

2.1.0 Theoretical literature - - - - - - - 7

2.1.1 The Keynesian view on monetary policy - - - - 9

2.1.2 The classical view on monetary - - - - - 14

2.1.3 The monetarist view of monetary policy - - - - 16

2.2.0 Meaning, instruments and objectives of monetary policy - - 21

2.2.1 Instruments of monetary policy - - - - - 25

2.2.2 Open market operation (OMO) - - - - - 25

2.2.3 Reserve requirement ration - - - - - - 26

2.2.4 Discount rate - - - - - - - - 27

2.2.5 Selective credit controls - - - - - - 28

2.2.6 Moral suasion - - - - - - - - 28

2.3.0 Objectives of monetary policy - - - - - - 29

2.4.0 Monetary policy indicators - - - - - - 30

2.5.0 Monetary policy targets and implication to the Nigerian Economy 

2.6.0 Factors that have militated against the impact of monetary policy

in Nigeria - - - - - - - - -32

2.6.1 Instability of the financial sector - - - - - 32

2.6.2 Poor state of Economic infrastructure - - - - 33

2.6.3 Non-Harmonization of monetary and fiscal policy - - - 33

2.6.4 Increase in government expenditure - - - - 33

2.6.5 Equate rate bank - - - - - - - 34

2.7.0 The impact of monetary policy during the depression Era

of structural adjustment programme (SAP) - - - 34

2.8.0 Debt management as an integrated part of monetary policy - 36

2.9.0 The impact of monetary policy on the economy - - - 38

2.10.0 Economic stabilization - - - - - - 38

2.11.0 Empirical literature review - - - - - - 40

CHAPTER THREE

3.0 Methodology - - - - - - - - 46

3.1 Theoretical framework - - - - - - - 47

3.2 Estimation procedure - - - - - - - 48

3.3 Model specification - - - - - - - 49

3.4 Method of evaluation - - - - - - - 51

3.5 Data required and sources - - - - - - 53

3.6 Decision rule - - - - - - - - 53

CHAPTER FOUR

4.0 Presentation of analysis of result - - - - - 55

4.1 Presentation of regression result - - - - - 55

4.2 Result interpretation - - - - - - - 56

4.2.1 Evaluation based on Economic criteria - - - - 56

4.2.2 Statistical test (first order test) - - - - - 57

4.2.3 Econometrics test (second order test) - - - - - 61

CHAPTER FIVE

5.0 Summary, Recommendations and Conclusion - - - 68

5.1 Summary of findings - - - - - - - 68

5.2 Recommendations - - - - - - - 69

5.3 Conclusion - - - - - - - - 70

BILBIOGRAPHY - - - - - - - - 72

APPENDIX