Journal of economics and sustainable development iiste. Part two focuses on issues that specifically relate to inflation targeting it in emerging markets, including the possible macroeconomic impact of the transition process. Nevertheless, it is commonly believed to be an implicit inflation targeter. Pdf inflation targeting monetary policy stance of nigeria was examined using taylor policy rule. A proposed programme for implementation by the central bank of nigeria 3 provide an input into addressing these issues, especially as regards resolving the technical, administrative and practical problems for a transition to inflation targeting as a framework for monetary policy in nigeria. Inflation targeting monetary policy, inflation volatility. The evidence shows that inflation targeting countries have been able to reduce their longrun inflation below the levels that they would have attained in the absence of inflation targeting, but not below the levels that have been. Inflation targeting monetary policy, inflation volatility and economic growth in south africa wolassa l kumo1 1 wolassa l. For example, while most inflation targeting central banks use a shortterm interest rate as their instrument, inflation targeting can also be implemented using the reserve money instrument currently employed by the cbn. Appropriateness of inflation targeting in south africa. The comparison was done to determine if the reserve bank was on the right track in adopting inflation. The main purpose of this study is to empirically examine the effectiveness of monetary policy in controlling inflation in nigeria. Nov 20, 2019 nigerias inflation has been higher than the average for african and subsaharan countries for years now, and even exceeded 16 percent in 2017 and a real, significant decrease is nowhere in.
Inflation targeting has been successful in emerging markets in emerging markets, it appears to have been associated with lower inflation, lower inflation expectations and lower inflation. Inflation targeting has no significant impact on the economic growth in nigeria. The research will therefore aim to assess the effect of exchange rates pass through, extend and speed in nigeria for the periods of 1985 to 2014 using time series analysis. The key determinants of inflation in nigeria are traceable to such variables as government expenditure, money supply, and interest rate. Gokhan yilmaz the central bank of the republic of turkey research department discussion paper september, 2000. The research was based on the period prior to inflation targeting and the period of inflation targeting. Humanitarian assistance the population of northeast nigeria continues to be ravaged by a protracted crisis, now entering its ninth year, which continued to cause displacement, hamper development and erode resilience. Inflation targeting and economic growth nexus in nigeria. A new report by the monetary policy department of the central bank of nigeria, cbn, has indicated that a fullfledged inflation targeting framework may not be very. Dada8 abstract9 monetary policy in nigeria has faced severe challenges with little success. Inflation targeting is a central banking policy that revolves around meeting preset, publicly displayed targets for the annual rate of inflation. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy framework that several emerging markets have adopted over the last one decade.
For example, if the base year cpi is 100 and the current cpi is 110, inflation is 10 percent over the period. Part one outlines briefly the underlying mechanisms of inflation management and general approaches to inflation targeting. Kumo is country economist, at the african development bank, south africa regional office. Asekunowo1 this study sought to identify the traditional and institutional inflation variables responsible for inflation phenomenon and the magnitude of the contribution of the identified variables to the rise in general price level. Inflation targeting in developing countries ferya kadioglu nilufer ozdemir. Inflation targeting is a monetary policy strategy used by central banks for maintaining inflation at a certain level or within a specific range. This is probably with the belief that it is an opportune time to take advantage of the perceived benefits derivable from an inflation targeting regime.
Nigeria inflation rate 19962020 data 20212022 forecast. Core consumer inflation focuses on the underlying and persistent trends in inflation by excluding prices set by. Is transition to inflation targeting good for growth. The persistence of moderate inflation in the czech republic. The assumption is that the best that monetary policy can do to support longterm growth of the economy is to maintain price stability. Inflation targeting is an operational framework for monetary policy in which the attainment of price stability becomes the overriding objective of the monetary authority. This thesis aims to evaluate the inflation targeting regime of south africa based on.
Inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the mediumterm and announces this inflation target to the public. This page provides nigeria inflation rate actual values, historical data, forecast, chart, statistics, economic calendar and news. Generally, inflation targeting is a policy in which an estimated inflation target is made public and deliberately pursued. Yemitan abstract in recent times, inflation figures used by policy makers and investors are usually at lag one i. Content licence especially creative commons licences, you may exercise further usage rights as. Lessons for inflation targeting prospects in nigeria oduh, moses onyema 1 oduh, maryann ogechi 2 onyia, mathew arinze 3 1. Studies on topical issues affecting the nigerian economy are published in order to communicate. How did we get to inflation targeting and where do we need. In the cbn report titled relevance of inflation targeting for developing countries in the new normal. Central bank of nigeria monetary targeting the banks current monetary policy framework is monetary targeting with. It intends to examine the impact of inflation targeting on economic growth in nigeria, within the period. Second, nigeria is absent from the list of countries that have adopted inflation targeting as a monetary policy framework, while south africa and ghana are the only countries in africa that have adopted inflation targeting. This research was conducted to evaluate the adoption of inflation targeting in south africa as a strategy to maintain price stability. An application of vector autoregressive var model this work seeks to explore the applicability of inflation targeting in the nigerian economy based on time series data from 1990q1 to 2014q4.
Inflation targeting as a monetary policy in nigeria semantic scholar. Inflation targeting is more likely to improve economic performance in countries that choose to have an independent domestic monetary policy, but there are subtleties in how inflation targeting is done. Inflation targeting a framework for monetary policy that commits the central bank to achieving low inflation has enjoyed considerable success among industrial countries in helping to maintain price stability. Annual time series data, sourced from central bank of nigeria cbn statistical bulletins 19852012 were used to analyze and estimate the three multiple regression models drawn up, with the aid of software package for social sciences spss. Inflation targeting monetary policy and output in nigeria eme a. Oconnell1 january 4, 2010 in an inflation targeting it framework, the central bank commits to a publicly announced numerical range for inflation, subordinates other intermediate targets, and institutionalizes its commitment through a set of mechanisms that emphasize. Pros and cons of inflation targeting gill hammond deputy director, ccbs, bank of england. Formal inflation targeting is still uncommon in african countries, with only south africa and ghana having officially adopted the framework at the current time. Base reserve money as operating target broad money supply m2 as intermediate target inflation as the ultimate or final target both the operating target and intermediate target are employed in determining the optimum level of money.
In general, central banks normally follow a policy of keeping inflation sufficientl. For example, in 1998 gdp growth rate was relatively high amidst the. The trend between inflation and economic growth in nigeria the facts and figures obtained from the imf world economic outlook report 2011 revealed that the nigerias gdp tends to be low when the inflation rates are high apart from a few years of the 80s. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy. Chapter one 2 jeff mashele mba 1011 in march 1933, parliament passed the currency and exchanges act, no 9 of 1933, which linked the value of the domestic currency to that of uk pound sterling. In short, the contention is that the current ination targeting monetary policy regime constrains economic growth and. Inflation targeting has been a success in the countries that have adopted it. Inflation targeting is a monetary policy strategy in which central bank estimates and makes public a target inflation rate and then, attempts to steer actual inflation towards the target through the use of other key macroeconomic variables such as interest rate changes and other monetary tools. One choice of monetary strategy that has become increasingly popular in recent years is inflation targeting, which. It, therefore, seeks to estimate the quantitative relationship between inflation, monetary policy. The need to target inflation and ensure a low level of inflation that is consistent with growth of economic activity stems from the fact that the existing monetary targeting approach has not been consistent with set targets. Changing views on the role and effectiveness of monetary policy. Ajisafes study was preoccupied with the monetary factors that could cause inflation, at the expense of fiscal factors.
The authors are assistant specialist and researcher, research department of the central bank of the republic of turkey, respectively. D department of financial management technology fmt school of management technology. Integrated inflation targeting iii abstract this book provides a thorough assessment of recent experiences with inflation targeting it, the challenges it has faced since the global financial crisis, and ways in which these challenges have been, or should be, addressed. The discussion is conducted income countries from the perspective of middle. Inflation, real exchange rate shocks, passthrough, real profits, real broad money supply, inflation persistence, nigeria. Inflation targeting, as a formal monetary policy regime, was first introduced in new zealand in 1990 and has since been adopted by numerous countries around the world. Kumo is country economist, at the african development bank, south africa regional office, pretoria. Inflation targeting with dynamic time series modelling the nigerian case olanrewaju i. Lessons from industrial countries should be useful to central banks designing a framework for monetary policy. The federal reserve is not formally inflation targeting. Scope of the study this project covers a period of 21 years, that is from 1980 to 2011. The causes of persistent inflation in nigeria victor o. The need to target inflation and ensure a low level of inflation that is consistent with growth. Inflation targeting monetary policy, inflation volatility and.
One of the features of an inflation targeting framework is the greater degree of transparency it brings to monetary policy. The evolution to inflation targeting occurred because central banks, most importantly the federal reserve, demonstrated that monetary policy could control inflation. Some researchers argued that, monetary policy is an effective policy measure to achieve inflation targeting, these researchers include gbadebo and muhammed 2015, herberger 1978, mccallum and nelson 2010, graude and polan 2005. The bank of ghana, adopted inflation targeting in 2002 but made an official announcement of its use in 2007, making ghana the second country to adopt inflation targeting. The persistence of moderate inflation in the czech republic and the koruna crisis of may 1997 december 1998 abstract macroeconomic policy in the czech republic has been based on a fixed exchange rate for most of the post1993period and a conservative fiscal policy characterized by a government budget that was. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy framework that several emerging markets have.
Inflation targeting is a monetarypolicy strategy that is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major role to an inflation forecast and has been called forecast targeting, and a high degree of transparency and accountability. Inflation targeting as a monetary policy in nigeria. Inflation targeting monetary policy, inflation volatility and economic. In short, the contention is that the current ination targeting monetary policy regime constrains economic growth and consequently sties employment creation and. It spurs the economy by making you buy things now before they cost more. Adopting inflation targeting for monetary policy iosr journal. Objectives of the study the broad objective of this study is to analyze the impact of inflation targeting on nigeria s economic growth, while. Under the existing approach monetary target which is qualitybased, is focused on controlling money and credit. Why have all the policies used by cbn are unable to target the rate of inflation on nigeria s economic growth.
Nigeria core inflation rate 20072020 data 20212022. Pdf is nigeria ready for inflation targeting semantic. Proposed inflation targeting or mistargeting in nigeria. Inflation targeting is a monetary policy framework in which the central bank announces an explicit inflation target and implements policy to achieve this target directly.
What are the impacts of inflation targeting on nigeria s economic growth. This page provides nigeria inflation rate actual values, historical data, forecast. This paper investigates the impact of inflation targeting monetary policy and inflation volatility on. Monetary regimes and inflation targeting enzo croce and mohsin s. If the documents have been made available under an open. E42,e43,e47,e52,e58 abstract inflation targeting is a monetarypolicy strategy that is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major role to an inflation forecast and has. Inflation targeting, economic growth, trends, nigeria 1 introduction inflation targeting was initially adopted by new zealand in 1990 and the features and norms within the inflation targeting regime have been so powerful that some central banks of the. Therefore, the research work intends to make a critical assessment of the determinants of inflation in nigeria is the necessary condition upon which a lasting solution to inflation can be found in nigeria. Can inflation targeting regime work effectively in nigeria which employs the. Therefore, it is possible that the impact of inflation targeting on inflation and on other macroeconomic variables may arise through its effects on inflation expectations and on the expectationsformation process. This paper attempted to critically analyze the basic issues, problems and prospects germane to the adoption of inflation targeting as a monetary policy framework for nigeria. Inflation targeting framework south african reserve bank. However, in inflation targeting, there is a preset, publicly declared target.
Effectiveness of monetary policy on inflation targeting in. The nbs has revised the cpi format a number of times, based on the. Integrated inflation targeting another perspective from. Inflation targeting is a monetary policy strategy in which central bank estimates and makes public a target inflation rate and then, attempts to steer actual inflation towards the target through the use of other key macroeconomic. Shehu usman rano aliyu1 and abwaku englama2 abstract this paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy framework that several emerging markets have adopted over the last one decade. Inflation targeting as a monetary policy has been adopted widely by many countries both developed and developing. Department of economics, university of nigeria, nsukka 3. Generally, inflation targeting is a policy in which an estimated inflation target is made public and deliberately pursued using the instruments of monetary management such as interest rate to steer actual inflation towards the desired policy target. Base reserve money as operating target broad money supply m2 as intermediate target inflation as the ultimate or final target both the operating target and intermediate target are employed in determining the optimum level of. Pdf inflation targeting monetary policy rule in nigeria. But recent policy indication shows that the central bank of nigeria cbn may have softpedaled in the pursuit of fullfledged inflation targeting for the country. The central bank does this to make you believe prices will continue rising.
He reported that money supply, real gross domestic product, previous level of inflation and exchange rate cause inflation in nigeria. Given this, formal inflation targeting was needed to improve sarb. Pdf effectiveness of monetary policy on inflation targeting in nigeria 1990 20 ajhssr journal academia. Inflation targeting in nigeriaenglama munich personal repec. A recent study by chimobi and uche 2010 examined the relationship between money, inflation and output in nigeria. For example, if a country is likely to adopt inflation targeting when the economy is slowing down, thus facing less inflationary. Posen he key issue facing central banks as we approach the end of the twentieth century is what strategy to pursue in the conduct of monetary policy. Flexible inflation targeting, forecast targeting, optimal monetary policy.
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