SciELO - Scientific Electronic Library Online

 
vol.12 issue1Financial development and economic growth: Literature survey and empirical evidence from sub-Saharan African countriesExplaining long-term growth in Namibia author indexsubject indexarticles search
Home Pagealphabetic serial listing  

South African Journal of Economic and Management Sciences

On-line version ISSN 2222-3436
Print version ISSN 1015-8812

S. Afr. j. econ. manag. sci. vol.12 n.1 Pretoria Apr. 2009

 

ARTICLES

 

A dynamic macroeconomic model of the Nigerian economy with emphasis on the monetary sector

 

 

Enang Bassey Udah

Department of Economics, University of Calabar-Nigeria

 

 


ABSTRACT

The dynamic nexus between money supply, fiscal deficit, inflation, output and exchange rate management has recently generated much debate in economic literature in Nigeria. To contribute to this debate, this paper uses the co-integration and error correction framework of analysis and also conducts policy simulation experiments to investigate how monetary variables interact with aggregate supply, demand and prices in order to aid stabilisation policies. The results show that monetary variables and government finance are linked through government's net indebtedness to the banking system. The simulation results show that a 20 per cent monetary squeeze would reduce the inflation rate faster than if the reduction in money supply were 10 per cent. This reduction in money supply would also lead to a reduction in output, employment and government expenditure, which may hurt the domestic economy. The paper thus concludes that there is a trade-off between higher GDP growth and inflation in Nigeria.

Key words: monetary policy, fiscal policy, macroeconomic management, simulation experiment

JEL E52, E62


 

 

“Full text available only in PDF format”

 

 

References

AJAYI, SI (1978) "The demand for money in Nigeria: Comments and extensions", Nigerian Journal of Economic and Social Studies, 16, (1): 11-22.         [ Links ]

BODKIN, RG; KLEIN, LR & MARWAH, K (1986b) "Keynes and the origins of macro econometric modelling", Eastern Economic Journal, 11 (1): 442 - 450.         [ Links ]

BOGUNJOKO, JO (1997) "Monetary dimension of the Nigerian economic crisis: Empirical evidence from a co-integration paradigm", The Nigerian Journal of Economic and Social Studies, 39 (2): 140-147.         [ Links ]

GUJARATI, DN (2004) Basic Econometric, Tata McGraw-Hill publishing Company, India, 817-830.         [ Links ]

GRANGER, CWJ & NEWBOLD, P (1974) "Spurious regression in econometrics", Journal of Econometrics, 2(1): 111-20.         [ Links ]

IKHIDE, SI (1998) "Simulating an econometric model of Nigeria's financial sector", The Nigerian Journal of Economic and Social Studies, 30: 1-25.         [ Links ]

IYOHA, MA (1996) "Macro econometric models", In M. I. Obadan & M.A. Iyoha (eds.) Macro Econometric Policy and Analysis: Tools and Techniques with Application to Nigeria, Ibadan: National Centre for Economic Management and Administration.         [ Links ]

IYOHA, MA (2002) "An econometric model of the Nigerian economy", In Milton A Iyoha & Chris O Itsede (eds.) The Nigerian Economy: Structure, Growth and Development, Ibadan: Mindex Publishers.         [ Links ]

JHINGAN, ML (1997) Monetary Economics, New Delhi:Vrinda Publications.         [ Links ]

KHAN, MS & MALCOLM DK (1981) "Stabilization programs in developing countries: A formal framework", IMF Staff Papers, 23: 1-53.         [ Links ]

MEYER, LH (2001) "Does money matter"? Federal Reserve Bank of St. Louis Monthly Review, September 82, 102-115.         [ Links ]

NDEBBIO, JEU & EKPO, A (1991) The Nigerian Economy at the Cross Roads: Policies and their Effectiveness, Calabar: University of Calabar Press.         [ Links ]

OJO, O (1973) "A medium-term planning model of the Nigerian economy", Nigerian Journal of Economic and Social Studies, 15: 80-96.         [ Links ]

OLOFIN, S & POLOAMINA, D (1984) The Revised CEAR - MAC IV Macro-econometric Model of the Nigerian Economy, Ibadan: Centre for Economic and Allied Research.         [ Links ]

PALANIVEL, T & KLEIN, R (1999) "An econometric model for India with emphasis on the monetary sector", The Development Economics, 37 (3) 275 - 336.         [ Links ]

PATTERSON, K (1990) An Introduction to Applied Econometrics: A Time Series Approach, United Kingdom: Palgrave Publishers.         [ Links ]

SOLUDO, CC (1998) Macro Economic Policy Modelling of African Economics, Enugu: Acena Publishers.         [ Links ]

TOBIN, J (1999) "Monetary policy: Recent theory and practice", Cowles Foundation Papers, 97(5): 1-7.         [ Links ]

UWUJAREN, GP (1977) "Specification and estimation of an economy-wide macro economic model for Nigeria", Nigeria Journal of Economic and Social Studies, 19: 107-134.         [ Links ]

VALADKHANI, A (2003) "History of macro econometric modelling: Lessons from past experience", Papers on Economics, Finance and International Competitiveness presented at the School of Economics and Finance, Queensland University of Technology, Australia.         [ Links ]

Creative Commons License All the contents of this journal, except where otherwise noted, is licensed under a Creative Commons Attribution License