MONETARY POLICY AND MISERY INDEX IN NIGERIA

Chioma Chidinma George-Anokwuru

Abstract


This study investigated the influence of monetary policy on the misery index in Nigeria. The data for the study were collected from the numerical bulletin of Nigeria’s apex bank spanning 1985 to 2019. The misery index was measured by the sum of unemployment, inflation, and lending rates minus the percentage change in Real Gross Domestic Product per capita. The Augmented Dickey-Fuller test and Autoregressive Distributed Lag - ARDL model were the main tools of analysis. The outcome of the unit root test indicated that the variables were stationary at order zero and one, which fulfilled the requirement to employ the ARDL Bounds testing method. The ARDL Bounds test revealed the presence of long-run association among the variables. The results revealed that monetary policy rate and exchange rate have a significant relationship with the misery index in Nigeria during the period of study. However, there is no significant relationship between the broad money supply and the misery index in Nigeria during the period of study. The study concluded that though monetary policy has the potential of reducing the misery index in Nigeria but it has not been well managed to reduce the misery index in Nigeria during the period of study. That is, monetary policy has not been effective in reducing the misery index in Nigeria during the period of study. Based on these findings, the study recommended that monetary authority should adopt the monetarists’ ‘monetary rule’ whereby the money supply is increased at a rate equal to the potential annual growth rate of the Gross Domestic Product. The monetary authority should also evaluate her interest rate policies to stimulate investment, increase output of goods and services, employment opportunities and reduce the poverty and misery index in the country. That is, make the financial sector to be strong to provide credit at lower interest rates which in turn will increase investment, output of goods and services, employment opportunities and reduce the poverty and misery index in Nigeria. The authority should maintain a managed floating exchange rate system to redress the problem of exchange rate variation in order to reduce the misery index in Nigeria.

JEL: E42; E50; E52

 

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Keywords


monetary policy, misery index, MPR, ARDL and Nigeria

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References


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DOI: http://dx.doi.org/10.46827/ejefr.v7i2.1494

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