Efficacy of Monetary Policy Measures on Price and Exchange Rate Stabilty in Nigeria

Abstract

The study investigated the efficacy of monetary policy measures on price and exchange stability in Nigeria using the Ordinary Lease Square (OLS), Johansen Co-integration approach and Error Correction Technique on time series data collected from 1981 to 2021. The unit root tests using Augmented Dickey-Fuller (ADF) found that consumer price index and exchange rate are integrated of order zero I(0) and money supply, lending rate, interest rate and external reserve are stationary at first difference I(1) and also show that there exist a long-run relationship among the variables. The study revealed that monetary supply (MS2) shows a positive statistical significant to consumer price index and exchange rate. In view of these findings, the study concluded and recommended that the government to ensure a stable economy, there is need for them to diversify the economy so as to channel excessive money supply resulting from deficit financing, different economic yielding ventures that are remote causes of instability in Nigeria economy so as to select the proper monetary policy instrument capable of controlling instability in the economy.