MONETARY POLICY REGIMES AND MACROECONOMIC PERFORMANCE IN NIGERIA

Abstract

The study examines the effectiveness of monetary policy in influencing macroeconomic performance during the monetary targeting and inflation targeting regimes. Money supply and interest rate are the two policy instruments for the two regimes. The study employed autoregressive distributed lag to estimate variables such as gross domestic product, inflation, exchange rate, total government expenditure, public debt, oil price, per capita income, investment, and unemployment. The study uses annual secondary data that is sourced from the central bank of Nigeria statistical bulletin and world development indicator (online version) between 1986 and 2021. Results show that monetary policy is not effective in influencing macroeconomic performance during the monetary targeting regime as an increase in the stock of money is used for the importation of finished goods. However, monetary policy performs better under the inflation-targeting regime with an interest rate as the policy instrument. The study concludes that inflation targeting should be made explicit in the country and therefore, recommended that interest rate should be the nominal anchor in Nigeria.