Monetary aggregate targeting and inflation in Nigeria

Abstract

In a capitalist economy, monetary aggregate policy instruments are normally employed by monetary authorities. This attempt is to achieve counter cyclical policy objectives like the level of inflation, a reasonable level of price stability, an equitable distribution of income and wealth, a favourable balance of payments and acceptable rate of economic growth and development among others. To the financial analysts, if the direction of the volume of money supply into a given economy and the velocity and output of good and services remain constant, there is bound to be an impact on prices. The significant role of monetary aggregates in tackling the problem of inflation in any economy can not be under estimated. However, the continued over reliance on the use of monetary
aggregates in addressing the issue of inflation in Nigeria is the main thrust of this paper which posits that rewarding answers to the problem of inflation in Nigeria is a joint efforts of monetarists and fiscal analysts. It further examines how money supplied can be used as an intermediate target variable to face the governments monetary recklessness.

Keywords: Inflation, Monetary Management and Central Bank

Agrosearch Vol. 8(1&2) 2006: pp. 81-93