This study is designed to examine the impact of interest rate on nigeria. The reason for this exercise is nigeria has been under pressure from the international lending agencies such as imf and world bank to reduce the inflation rates in order to boost economic growth. Threshold inflation, economic growth, conditional least squares, west african monetary zone, ghana, nigeria. Effects of exchange rate fluctuations on economic growth. Impact of inflation on nigeria economic growth 19812016. However, the major impact of the increase in budget deficit was felt in 1993, with high rate of inflation which shows an evidence of a positive relationship between budget deficit and inflation in nigeria, although other macroeconomic factors could have accounted for this.
This growing capacity is said to base on advancing technology. The study involves comparative analysis of the impact of fiscal policy on economic growth in nigeria during regulation and deregulation periods. Doguwa1 this paper reexamines the issue of the existence and the level of inflation threshold in the relationship between inflation and growth in nigeria, using three different approaches that provide appropriate procedures for estimating the threshold level. Examine the effect of monetary policy on inflation in nigeria. The importance, effect, causes, relationship, comparison, history, role, solutions are discussed. The results of unit root suggest that all the variables in the model are stationary and the results of. Pdf threshold effect of inflation on economic growth in. Consumer price index cpi was used as a proxy for inflation and the gdp as a perfect proxy for. Apart from ghana, south africa and nigeria currently pursuing an inflationtargeting regime, most of the rest of african countries pursue a monetary targeting.
The adverse effect of external debt and economic growth related problems on the nigeria economy are becoming unbearable. The result shows that inflation has a positive and an insignificant impact on the economic growth while unemployment has a negative and an insignificant impact on the economic growth in nigeria in. Using time series data spanning forty one years 19702011 which was obtained from the central bank of nigeria cbn statistical bulletin volume 22, and central bank of nigeria. The effect of inflation on debtors is positive because debtors can pay their debts with money that is less valuable. The work covered a period of 19812009 using an annual data from central bank of nigeria statistical bulletin. Stylized facts about inflation and economic growth in africa table 1 and appendix 6 present inflation and growth experiences in africa. The issue of inflation has been a matter of concern for economists overtime as it remains a fact that the real. So the study will be of importance to educate nigerians by revealing to them that one of the major reason why nigeria economy is growing very slow could be trace back to inflation and interest rate problem. This paper examined the effect of inflation on economic growth in nigeria utilizing annualized data covering the period 1986 2015, which were obtained from the central bank of nigeria cbn statistical bulletin of various issues. Is the effect of interest rate of economic growth rate. Impact of monetary policy on economic growth in nigeria. Pdf threshold effect of inflation on economic growth in nigeria. By 1976, however, the inflation rate stood at 23 per cent. Economic growth can be defined as the increase in the inflationadjusted market value of the goods and services produced by an economy over time.
Monetary policy cooperant factors do not have significant impact on economic growth in nigeria. It was the highest inflation rate since april of 2018, largely driven by the effects of the border closure and the new vat tax rate. Nigerias yearonyear headline inflation entered into the doubledigit range in february. The results showed that at low levels, inflation does not hurt economic growth, while at higher levels, inflation reduces economic growth. Threshold effects in the relationship between inflation. Hence, the effects of various macroeconomic shocks depend on the exchange rate policy adopted by the country, it is therefore important to investigate the effects of exchange rate fluctuations on the nigeria economic growth and also the factors that influence exchange rate in nigeria. Ascertain the effect of monetary policy on cooperant factors in economic growth in nigeria. To study the relationship between unemployment and economic growth in nigeria. Abstract this paper examines the effect of inflation and economic growth on unemployment in sri lanka for the period 19902012. Consequeuntly, the need to understand the relationship between inflation and economic growth of the nigerian economy become imperative and the dynamics of. It is conventionally measured as the percent rate of increase in real gross domestic product, or real gdp growth is usually calculated in real terms i. Abdullahi 2 it is widely believed that price stability promote longterm economic growth, whereas high inflation is inimical to growth.
A dynamic panel threshold analysis for asian economies. Conceptual framework the concept of inflation has been define as a persistence rise in the general price level of broad spectrum of goods and services in a country over a long period of time. Timeseries data for the period 1990 2011 were used to examine the impact of inflation on economic growth. Impact of inflation on nigeria economic growth mensch mind. Effect of inflation on the growth and development of the nigerian. The broad objective of this study is to examine the effect of unemployment on economic growth in nigeria. In order to have a clear understanding about relationship between inflation and economic growth from 1995 to 2010 on ssa countries, the investigator uses the following graph. These results suggest that the threshold level of inflation above which inflation is inimical to growth is estimated at. Given the major distortions caused by it in the economic growth of the country and the living standard of the citizenry, various administrations in nigeria in the past and present had adopted various measures to deal with inflation in the country without achieving the desired goal. Impact of unemployment on economic growth of nigeria. The effect of inflation and interest rate on economic growth of nigeria includes abstract and chapter one, complete project material available the effect of inflation and interest rate on economic growth of nigeriaabstractthe gross domestic product growth is a long term rise in the capacity to supply increasingly diverse economic goods o its population.
Interest rates have an influence on economic growth. The impact of rapid inflation growth has led the federal government of nigeria to adopt several sexual measures of inflation control. This paper investigates the effects of inflation on economic growth in nigeria between 1986 and 2014. Impact of inflation and economic growth on unemployment in.
There is a general consensus that high inflation r ates and interest rate cause problems for aggregate. Economic growth can be defined as the increase in the inflation adjusted market value of the goods and services produced by an economy over time. Threshold effects of inflation on economic growth in africa. Impact of inflation on economic growth in nigeria a. Get free research paper on impact of inflation on government spending on nigeria economy 1981 20 project topics and materials in nigeria.
Ordinary least square method and ttest was used to test the variables most likely to impact on economic growth in nigeria due to inflation. Analysis of the effect of inflation, interest rates, and. The existence and link between inflation and economic growth continue to be a subject of considerable interest and debate. Analysis of the effect of inflation, interest rates, and exchange rates on gross domestic product gdp in indonesia.
How inflation and interest rates are related to economic. It was established that the variables inflation rate and gdp. Section 5 presents and discusses the empirical results, and section 6 gives concluding remarks. The objectives that will guide this study are as follows. Threshold effect of inflation on economic growth in nigeria sani bawa 1 and ismaila s.
Nigeria s yearonyear headline inflation entered into the doubledigit range in february. And since there exists a positive relationship between inflation and economic growth in nigeria, the bad era of double digit inflation rate could be effectively utilized by the nigeria government to erode the countrys debt burden. The gross domestic product growth is a long term rise in the capacity to supply increasingly diverse economic goods o its population. The country experiences on inflation is no longer the problem but the fact that inflation problem seems to have reached the crisis dimension. Ito, isard and symasnsky 1999 found that high economic growth. Ultimately, we will test whether a meaningful relationship between the two variables exists in fiji. Threshold effects of inflation on economic growth in africa african.
Threshold effects of inflation on economic growth in. It is conventionally measured as the percent rate of increase in real gross domestic product, or real gdp. An analytical study of the impact of inflation on economic growth in. Impact of unemployment on economic growth of nigeria mensch mind. Impact of foreign direct investment on nigeria economic.
Using a structural vector auto regression svar model, the paper explores the relationships between the monetary policy rate interest rate, growth rate of money supply, inflation, exchange rate growth and growth rate of output. Analysis of inflation and its effect on economic growth in nigeria. Measuring the economic growth of a country aims to assess whether the growth can cope with the growing demands of the society. To discuss the factors affecting unemployment and economic growth in nigeria. Effect of inflation on the growth and development of the. Inflation and its effect on economic growth has been a primary concern of policy makers the world over. Inflow of remittances the result of the trend analysis showing the flow of international remittances to nigeria from 1980 2009 is. The study recommended that government should adopt tight monetary policy measures to stabilize tide of inflationary pressures on our economy. The study was conducted to evaluate the impact of inflation on economic growth in the context of an emerging market using empirical evidence from nigeria. An analytical study of the impact of inflation on economic. Aug 19, 2019 the effect of inflation on debtors is positive because debtors can pay their debts with money that is less valuable. Abstract economic growth can be defined as an increase in the ability of a country or region in providing for the economic needs of the population. Econometric analysis of time series data from central bank of nigeria was conducted. Impact of unemployment on economic growth in nigeria 1980 2010.
This thesis investigates the effects of unemployment and inflation on economic growth in nigeria between 19862012 through the application of ordinary least square ols technique in estimating the effects of unemployment and inflation on growth, augmented dickeyfuller test and phillip. Paramount among these measures are monetary and credit policies formulated restore balance of payment to a health. Effects of inflation rate on economic growth in nigeria. Structural analysis attempts to recognize how economic phenomena and finding the root of the permanent disease and destruction such as inflation that evaluates lawful relationship between the phenomena.
To achieve this objective, secondary data has been taken from central bank annual reports for the. Effects of unemployment and inflation on economic growth. By 1998, the inflation rate had, however, reduced to 9. This paper utilized a quarterly time series data for. Max and mark 2008 examined the effect of inflation on growth using panel of transition countries.
Inflation and economic growth in nigeria central bank of nigeria. This is approved for students in accountancy, business, computer science, economics, engineering, arts. And hence we conclude that the effect is contemporaneous. The economy never experienced doubledigit inflation during the 1960s. Threshold effect of inflation on economic growth in nigeria. The effect of inflation and interest r ate on economic growth in nigeria is a serious malady. The impact of unemployment on economic growth includes.
A growth model via the ordinary least square method was used to ascertain the relationship between fdi and economic growth in nigeria. The association between economic growth and inflation lingers a debatable one in both theory as well as empirical results because classical growth theory, keynesian theory, neoclassical theory, neokeynesian theory, the tobin effect and endogenous growth theory states that inflation is an important factor that facilitates economic growth. The results show that there exists a statistically significant positive relationship between inflation and economic growth in nigeria. This page provides nigeria inflation rate actual values, historical data, forecast, chart, statistics, economic calendar and news. Effects of inflation rate on economic growth in nigeria 1986. Pdf analysis of inflation and its effect on economic growth. The augmented dickeyfuller technique was adopted to test the unit root property of the series while granger causality was used to test the causation between. Nigeria, hence the need for a greater attention to it. Impact of unemployment on nigeria economic growth 19812017 pdf. Motivated by this controversial, this study examined the impact of inflation on economic growth and established the existence of inflation growth relationship. Impact of inflation on economic growth in nigeria a causality test. Analysis of inflation and its effect on economic growth in. Index used as proxy for inflation, gxp is government spending, eop is economic openness eop which is proxied by the ratio of total exports and imports to gdp and trn is lagged trend.
Impact of inflation and economic growth on unemployment in sri lanka. The negative relationship between economic growth and inflation is in line with the finding of ferdinand and isadora 2014, and inyiama 20. An overview of the nigerian economic growth and development. Therefore, it is our aim in this study to test whether rise in price has had positive or negative effect on economic growth in nigeria.
Pdf it is widely believed that price stability promote longterm economic growth, whereas high inflation is inimical to growth. Download the project from chapter one to five with reference. This paper investigates the impact of inflation on economic growth and development in nigeria between 19702010 through the application of augmented dickeyfuller technique in testing the unit root property of the series and granger causality test of causation between gdp and inflation. Inflation is a social malady as well as a pervasive economic process whose effects are felt by all and sundry in all sectors of the economy. Effects of unemployment and inflation on economic growth in.
The annual inflation rate in nigeria rose for the seventh straight month to 12. The effect of inflation and interest rate on economy growth in nigeria is quite a serious problem. The effect of inflation price instability in the growth and development of the nigerian economy cannot be overemphasized. Nigeria inflation rate 19962020 data 20212022 forecast. Based on inflationary perspective, our state of nation has been captured thus.
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