Relationship between money growth and inflation : Empirical evidence from Nigeria

This study examines the relationship between money growth and inflation in Nigeria using cointegration and causality analysis. The study used annual time series data from 1970 to 2012, Johansen cointegration approach, Vector Error Correction Model (VECM) and Granger causality test are used to identi...

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Main Author:	Hassan, Jakada Aminu
Format:	Thesis
Language:	eng eng
Published:	2015
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/4648/1/s815009.pdf https://etd.uum.edu.my/4648/2/s815009_abstract.pdf
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id	my-uum-etd.4648
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Hassan, Sallahuddin
topic	HG Finance
spellingShingle	HG Finance Hassan, Jakada Aminu Relationship between money growth and inflation : Empirical evidence from Nigeria
description	This study examines the relationship between money growth and inflation in Nigeria using cointegration and causality analysis. The study used annual time series data from 1970 to 2012, Johansen cointegration approach, Vector Error Correction Model (VECM) and Granger causality test are used to identify long run relationship, the short run dynamic and causal relationship among the variables respectively. The empirical results confirm that in the long run money supply growth has significant and positive relationship with inflation while lagged value of money supply growth has negative and insignificant relationship with inflation in the short run. Moreover, the causality test result reveals that money supply growth has unidirectional causal relationship with inflation, the causal relationship runs from money supply growth to inflation. However, interest rates and import have positive and significant relationship with inflation but exchange rates and GDP have negative and significant relationship with inflation in the long run. In the short run lagged GDP variable has significant and positive relationship with inflation, lagged import variable and lagged interest rate variable have significant and negative relationship with inflation, while lagged of exchange rate variable has insignificant and negative relationship with inflation in the short run. Moreover, the causality test result reveals that exchange rate, interest rates and GDP variable have unidirectional, bidirectional and no causal relationship with inflation, respectively. The study concludes that for maintaining price stability and minimum rate of inflation, Nigeria needs to reduce money supply growth, improve GDP, reduce interest rate and impose strong import restrictions measures as well as exchange rate depreciation along with import substitution strategy.
format	Thesis
qualification_name	masters
qualification_level	Master's degree
author	Hassan, Jakada Aminu
author_facet	Hassan, Jakada Aminu
author_sort	Hassan, Jakada Aminu
title	Relationship between money growth and inflation : Empirical evidence from Nigeria
title_short	Relationship between money growth and inflation : Empirical evidence from Nigeria
title_full	Relationship between money growth and inflation : Empirical evidence from Nigeria
title_fullStr	Relationship between money growth and inflation : Empirical evidence from Nigeria
title_full_unstemmed	Relationship between money growth and inflation : Empirical evidence from Nigeria
title_sort	relationship between money growth and inflation : empirical evidence from nigeria
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2015
url	https://etd.uum.edu.my/4648/1/s815009.pdf https://etd.uum.edu.my/4648/2/s815009_abstract.pdf
_version_	1747827773237362688
spelling	my-uum-etd.46482021-03-18T08:06:57Z Relationship between money growth and inflation : Empirical evidence from Nigeria 2015 Hassan, Jakada Aminu Hassan, Sallahuddin Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HG Finance This study examines the relationship between money growth and inflation in Nigeria using cointegration and causality analysis. The study used annual time series data from 1970 to 2012, Johansen cointegration approach, Vector Error Correction Model (VECM) and Granger causality test are used to identify long run relationship, the short run dynamic and causal relationship among the variables respectively. The empirical results confirm that in the long run money supply growth has significant and positive relationship with inflation while lagged value of money supply growth has negative and insignificant relationship with inflation in the short run. Moreover, the causality test result reveals that money supply growth has unidirectional causal relationship with inflation, the causal relationship runs from money supply growth to inflation. However, interest rates and import have positive and significant relationship with inflation but exchange rates and GDP have negative and significant relationship with inflation in the long run. In the short run lagged GDP variable has significant and positive relationship with inflation, lagged import variable and lagged interest rate variable have significant and negative relationship with inflation, while lagged of exchange rate variable has insignificant and negative relationship with inflation in the short run. Moreover, the causality test result reveals that exchange rate, interest rates and GDP variable have unidirectional, bidirectional and no causal relationship with inflation, respectively. The study concludes that for maintaining price stability and minimum rate of inflation, Nigeria needs to reduce money supply growth, improve GDP, reduce interest rate and impose strong import restrictions measures as well as exchange rate depreciation along with import substitution strategy. 2015 Thesis https://etd.uum.edu.my/4648/ https://etd.uum.edu.my/4648/1/s815009.pdf text eng public https://etd.uum.edu.my/4648/2/s815009_abstract.pdf text eng public masters masters Universiti Utara Malaysia Abel, A. B., Bernanke, B. S., & Croushore, D. (2008). Macroeconomics (6th edn): Boston: Pearson Education. Adamson, Y. K. (2000). Structural disequilibrium and inflation in Nigeria: A theoretical and empirical analysis. Center for Economic Research on Africa. New Jersey, 7043. Adesoye, A. (2012). Price, money and output in Nigeria: A cointegration-causality analysis. African Journal of Scientific Researchl, 8, 428-442. Adusei, M. (2013). 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Relationship between money growth and inflation : Empirical evidence from Nigeria

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