A proposed programme for implementation by the central bank of nigeria 3 provide an input into addressing these issues, especially as regards resolving the technical, administrative and practical problems for a transition to inflation targeting as a framework for monetary policy in nigeria. Results showed that inflation in nigeria is impassive to monetary transmission. Lessons for policy are drawn from the theoretical and. Various advanced economies including united states, canada and australia have been using inflation targeting as a strategy in their monetary policy framework. Inflation targeting as a possible monetary framework for nigeria by. Average inflation targeting and interestrate smoothing. Inflation targeting monetary policy, inflation volatility and economic growth in south africa wolassa l kumo1 1 wolassa l. Inflation targeting has been considered in the literature as most suitable approach for effectively anchoring inflation expectations sivak, 20. This debate once more threw up a need to reexamine the determinants of inflation in. Central bank of nigeria monetary targeting the banks current monetary policy framework is monetary targeting with. Nigeria s inflation has been higher than the average for african and subsaharan countries for years now, and even exceeded 16 percent in 2017 and a real, significant decrease is nowhere in. Pdf inflation targeting monetary policy rule in nigeria. Inflation targeting is a monetary policy regime, characterized by public announcement of official target ranges or quantitative targets for price level increases and by explicit acknowledgement that low inflation is the most crucial longrun objective of the monetary authorities. Inflation targeting monetary policy, inflation volatility.
Abdullahi 2 it is widely believed that price stability promote longterm economic growth, whereas high inflation is inimical to growth. Inflation targeting framework for monetary policy in nigeria. Threshold effect of inflation on economic growth in nigeria. Inflation targeting it has become the monetary policy framework of choice since its adoption by the reserve bank of new zealand in 1990. Shehu usman rano aliyu1 and abwaku englama2 abstract this paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy framework that several emerging markets have adopted over the last one decade. Inflation targeting has been successful in emerging markets in emerging markets, it appears to have been associated with lower inflation, lower inflation expectations and lower inflation. Oconnell1 january 4, 2010 in an inflation targeting it framework, the central bank commits to a publicly announced numerical range for inflation, subordinates other intermediate targets, and institutionalizes its commitment through a. Pros and cons of inflation targeting gill hammond deputy director, ccbs, bank of england. T his is because such a framework is useful in determining th e path of monetary policy. Base reserve money as operating target broad money supply m2 as intermediate target inflation as the ultimate or final target both the operating target and intermediate target are employed in determining the optimum level of. European journal of accounting auditing and finance. Towards inflation targeting framework for monetary policy. Some researchers argued that, monetary policy is an effective policy measure to achieve inflation targeting, these researchers include gbadebo and muhammed 2015, herberger 1978, mccallum and nelson 2010, graude and polan 2005.
The study employed descriptive approach to the study with data sourced from the central bank of nigeria statistical bulletin of various issues. But recent policy indication shows that the central bank of nigeria cbn may have softpedaled in the pursuit of fullfledged inflation targeting for the country. These ranged from exchange rate targeting, direct monetary. The study examined inflation targeting economic growth nexus in nigeria, with the aim of imbibing the useful lessons and avoiding the pitfalls from crosscountry experiences. Inflation targeting as a monetary policy in nigeria. Pdf is nigeria ready for inflation targeting semantic. Yemitan abstract in recent times, inflation figures used by policy makers and investors are usually at lag one i. As of 2008, the international monetary fund classified 31 central banks as inflation targeters. This paper investigates the impact of inflation targeting monetary policy and inflation volatility on economic growth in south africa.
Introduction his paper seeks to look at the challenges of moving to an inflation targeting t it regime, specifically in nigeria s emerging market environment. It intends to examine the impact of inflation targeting on economic growth in nigeria, within the period. Pdf inflation targeting as a monetary policy framework. Towards inflation targeting framework for monetary policy in nigeria. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy framework that several emerging markets have adopted over the last one decade. Regarding achieving price stability, bernanke, laubach, mishkin, and posen 1999 emphasize that an inflation targeting country may not wring inflation out of their economies without laying itself open to costs in lost output and rising unemployment. This implies that inflation in other countries are imported to the country through high demand import of goods and service by many nigerians. The research was based on the period prior to inflation targeting and the period of inflation targeting. A new report by the monetary policy department of the central bank of nigeria, cbn, has indicated that a fullfledged inflation targeting framework may not be very. Inflation targeting with dynamic time series modelling the nigerian case olanrewaju i. Threshold effect of inflation on economic growth in nigeria sani bawa 1 and ismaila s. Inflation targeting and exchange rate volatility in emerging markets.
Inflation targeting is a monetary policy strategy in which central bank estimates and makes public a target inflation rate and then, attempts to steer actual inflation towards the target through the use of other key macroeconomic. Inflation targeting as a possible monetary framework for nigeria. This groundbreaking study, in an effort to do this, examines inflation targeting as a possible monetary framework for nigeria, using time series data and with the aid of granger causality test and impulse response functions. This paper utilized a quarterly time series data for.
Pdf understanding the predictors of consumer sentiments. Effectiveness of monetary policy on inflation targeting in. Pdf budget deficit financing and inflation targeting in. Scope of the study this project covers a period of 21 years, that is from 1980 to 2011. Inflation targeting and economic growth nexus in nigeria. Monetary policy transmission and industrial sector growth. This page provides nigeria inflation rate actual values, historical data, forecast.
Over the years, nigeria has adopted different monetary policy regimes with limited or no success. Inflation targeting monetary policy stance of nigeria was examined using taylor policy rule. Therefore, the paper recommends that government should use exchange rate as inflation targeting instrument in nigeria to reduce the level of imported inflation for economic growth in nigeria. This work seeks to explore the applicability of inflation targeting in the nigerian economy based on time series data from 1990q1 to 2014q4. Inflation targeting, economic growth, trends, nigeria 1 introduction inflation targeting was initially adopted by new zealand in 1990 and the features and norms within the inflation targeting regime have been so powerful that some central banks of the. Inflation targeting has no significant impact on the economic growth in nigeria. New cbn study discredits inflation targeting model for.
Pdf inflation targeting monetary policy stance of nigeria was examined using taylor policy rule. We study the welfare implication of average inflation targeting as a simple interestrate rule, in which the monetary authority adjusts its shortterm policy rate in response to the output gap as well as average inflation deviation from its target instead of reacting to the contemporaneous inflation rate as. The case for inflation targeting has been made in india as the country has been experiencing a high level of inflation till recently. There are three prerequisites for inflation targeting. The study suggests that a more flexible inflation rate, increased money supply, access to credit and a modest but upward adjustment to capital and recurrent expenditure have. Integrated inflation targeting iii abstract this book provides a thorough assessment of recent experiences with inflation targeting it, the challenges it has faced since the global financial crisis, and ways in which these challenges have been, or should be, addressed. Inflation targeting monetary policy rule in nigeria. This research was conducted to evaluate the adoption of inflation targeting in south africa as a strategy to maintain price stability. Inflation targeting is a central banking policy that revolves around meeting preset, publicly displayed targets for the annual rate of inflation. The conduct of monetary policy in nigeria and all activities of the central bank of ni geria relate. Engle granger approach to cointegration was adopted and the results showed that implementation of monetary policy function was effectively done in order to achieve price stability.
The discussion is conducted income countries from the perspective of middle. Proposed inflation targeting or mistargeting in nigeria. Previous study was also consulted to enrich the work. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy. Furthermore, this study further dete rmines the directional flow of the causal r elationship among these variables a nd suggests better policy.
Integrated inflation targeting another perspective from. The incessant increase in interest rates, exchange rates, money supply and domestic credit have all accumulated, leading to persistent inflation in nigeria. This paper attempted to critically analyze the basic issues, problems and prospects germane to the adoption of inflation targeting as a monetary policy framework for nigeria. Simply, inflation targeting encompasses a monetary policy framework in which the central bank sets an explicit target for future inflation usually low inflation rate and work towards. Inflation, real exchange rate shocks, passthrough, real profits, real broad money supply, inflation persistence, nigeria. Inflation targeting is a monetary policy regime, which is characterized by public announcement of official target ranges or quantitative targets for price level increases and by explicit acknowledgement that low inflation is the most crucial longrun objective of the monetary authorities. Understanding the predictors of consumer sentiments. The comparison was done to determine if the reserve bank was on the right track in adopting inflation. Inflation targeting framework for monetary policy in. Inflation targeting as a possible monetary framework for. Imperial journal of interdisciplinary research ijir vol2, issue6, 2016 issn. Lessons for inflation targeting prospects in nigeria.
Even the us federal reserve and the swiss national bank, which. Journal of economics and sustainable development iiste. Inflation volatility is measured by conditional variance generated by fitting an empirical generalized autoregressive conditional hetroskedasticity garch model to a seasonally adjusted annualized quarterly consumer price inflation for the period 1960q120q3. Pdf inflation targeting in developing countries and its.
1371 1007 1359 98 1049 1054 354 283 932 1509 272 1015 1015 137 897 1496 243 845 1397 525 671 1100 1524 1410 1373 492 343 1351 663 1003 602 150 1305 913 1211 1096 532 745 703 963