THE EFFECTIVENESS OF MONETARY POLICY TOOLS IN CONTROLLING INFLATION IN NIGERIA

THE EFFECTIVENESS OF MONETARY POLICY TOOLS IN CONTROLLING INFLATION IN NIGERIA
 
ABSTRACT
The study examined the effectiveness of monetary policy in controlling inflation in Nigeria.  In the model specified, inflation is the regress and while cash reserved requirement, liquidity ratio, money supply, minimum rediscount rate and interest rate are the regressor.  Data was collected from CBN statistical Bulletin.  The statistical techniques used for the analysis is the ordinary least square technical with the aid of E-view 5.0 software package.  The research indicates that monetary policy adopted in Nigeria within the period under review failed to influence the inflation rate.  It has been identified that the major problem militating against the poor performance of monetary policy instrument in controlling inflation in Nigeria is time lags involved which makes any policy employed to take many months to achieve its full effect.
 
CHAPTER ONE
INTRODUCTION
1.1   Background of the Study
Inflation occurs when there is a general and continuous rise in the prices of goods and services in the economy. A major cost is related to the inefficient utilization of resources because economic agents mistake changes in nominal variables for changes in real variables and act accordingly. During inflationary periods opportunity cost of holding money is increased causing inefficient use of real resources in transactions. Therefore, inflation weakens the purchasing power of money and sinks the