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Is Inflation Always and Everywhere a Monetary Phenomenon? Evidence from Nigeria

Author

Listed:
  • J. Achua

    (Central Bank of Nigeria)

  • H. Nagado

    (Central Bank of Nigeria)

  • I. I. Okafor

    (Central Bank of Nigeria)

Abstract

Is inflation always a monetary phenomenon in Nigeria? Autoregressive Distributed Lag (ARDL) results of Nigerian data, spanning 2005q1-2017q4, indicate that changes in money supply have no long-run significant impact on domestic price level behaviour. The results, however, reveal that non-monetary factors: import, global oil price, exchange rate, inflation expectation, fuel pump price and monetary policy rate significantly upsurge inflationary pressure. Conversely, household income (the shadow of unemployment) significantly dampens inflationary pressure while fiscal deficits moderate the pressure. The findings establish the dominance of structural and fiscal dynamics in the inflation equation of the economy.

Suggested Citation

  • J. Achua & H. Nagado & I. I. Okafor, 2020. "Is Inflation Always and Everywhere a Monetary Phenomenon? Evidence from Nigeria," Economic and Financial Review, Central Bank of Nigeria, vol. 58(1), March.
    • Handle: RePEc:ava:cbnefr:v:58:y:2020:i:1:a:4:p:
    as

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    File URL: https://dc.cbn.gov.ng/cgi/viewcontent.cgi?article=1004&context=efr
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    References listed on IDEAS

    as
    1. Ikechukwu Kelilume, 2014. "Effects of the Monetary Policy Rate on Interest Rates in Nigeria," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(1), pages 45-55.
    2. Emeka Nkoro & Aham Kelvin Uko, 2016. "Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 5(4), pages 1-3.
    3. Moses Tule & Afees A. Salisu & Charles Chimeke, 2018. "You are what you eat: The role of oil price in Nigeria inflation forecast," Working Papers 040, Centre for Econometric and Allied Research, University of Ibadan.
    4. Salami Doyin & Kelikume Ikechukwu, 2013. "Is Inflation Always and Everywhere a Monetary Phenomenon? The Case of Nigeria," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 7(2), pages 105-114.
    5. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
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