Is Inflation Always and Everywhere a Monetary Phenomenon? The Case of Nigeria

The International Journal of Business and Finance Research, v. 7 (2) p. 105-114

10 Pages Posted: 29 Jan 2013

See all articles by Adedoyin Salami

Adedoyin Salami

Lagos Business School

Ikechukwu Kelikume

Pan-Atlantic University - Lagos Business School

Date Written: 2013

Abstract

In response to shocks, emanating from the global financial crisis of 2007-2008 the Central Bank of Nigeria has continuously used tight monetary policy instrument to check volatility in the general price level. The success of using monetary policy tool to influence the movement of key macroeconomic aggregates in Nigeria rests solely on the question of whether inflation is driven purely by changes in monetary aggregates. Using quarterly time series data for Nigeria over the period 1970 to 2011, we test the quantity theory relationship between money and price movement to establish if inflation is always and everywhere a monetary phenomenon. Using the autoregressive distributed lag (ARDL) modeling approach we obtained a robust estimate for Nigeria. The result of the study shows that inflation is not always and everywhere a monetary phenomenon in the case of Nigeria raising serious doubt on the continuous use of monetary policy tool to achieve price stability in Nigeria.

Keywords: Money Supply, Monetary Policy, Policy Regulation, Time series Model

JEL Classification: C22, E52, E63, G28

Suggested Citation

Salami, Adedoyin and Kelikume, Ikechukwu, Is Inflation Always and Everywhere a Monetary Phenomenon? The Case of Nigeria (2013). The International Journal of Business and Finance Research, v. 7 (2) p. 105-114, Available at SSRN: https://ssrn.com/abstract=2149122

Adedoyin Salami (Contact Author)

Lagos Business School ( email )

Km 22 Lekki Epe Expressway
Ajah
Lagos
Nigeria
+234-1-4616170 (Phone)
+234-1-4616173 (Fax)

HOME PAGE: http://www.lbs.edu.ng

Ikechukwu Kelikume

Pan-Atlantic University - Lagos Business School ( email )

Km 22 Lekki Epe Expressway
Ajah
Lagos
Nigeria

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