The fed what is the difference between monetary policy. Introduction during the 1980s and 1990s, the vulnerability of emes to shocks was often exacerbated by high fiscal deficits, underdeveloped domestic bond markets, and largecurrency and maturity mismatches. Pdf welfare effects of fiscal and monetary policy in nigeria. Harmonization of fiscal and monetary policies in nigeria by ayo. Difference between fiscal policy and monetary policy. The purpose of the nigerian fiscal policy is divided into two. The first view calls for monetary policy to achieve price stability, while the second view seeks to achieve. Ascertain the effect of monetary policy on cooperant factors in. Harmonization of fiscal and monetary policies in nigeria. However, the relative effectiveness of these policies is an issue that has continued to generate both academic and policy interests. Monetary policy is a central banks actions and communications that manage the money supply. Thesis in depart ment of economics, obafemi awolowo. Central bank of nigeria monetary policy department fiscal policy at a glance explains fiscal policy and related concepts using graphical illustrations. With the end of the civil war in 1970, which disrupted economic activities and an upsurge in wages due to revenues from the oil.
Fiscal policy is how congress and other elected officials influence the economy using spending and taxation. Evaluating the relative impact of monetary and fiscal policy in. The implementation of fiscal policy is essentially routed through governments budget. Fiscal policy is the means by which a government adjusts its level of spending in order to monitor and influence a nations economy. That includes credit, cash, checks, and money market mutual funds. Economic growth in the third quarter of 2017 was positive for the second.
Monetary policy and price stability in nigeria december 2006 through february 2012. Understanding nigerias monetary policy, by uddin ifeanyi. Fiscal policy, measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes and government expenditures. The impact of fiscal and monetary policy on nigerian economic. The evidence indicates that monetary and fiscal policies in nigeria. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective. Premium times july 1, 2019 understanding nigerias monetary policy, by uddin ifeanyi 20190701t08. The effect of fiscal policy on economic growth in nigeria. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in. Introduction during the 1980s and 1990s, the vulnerability of emes to shocks was often exacerbated by high fiscal deficits.
According to reem 2009, fiscal policy is based on the theories of british econ. The policy is used along with monetary policy in different combinations to direct a countrys goals. Central bank of nigeria, monetary policy department. The fundamental problem of any government is it economic or otherwise its implementation. Overall, the socioeconomic and political milieu, including the legal framework under which the central bank of. Equations of the monetary policy reaction model are specified and discussed in section 4, while sections 5 and 6 discuss the estimation results and preliminary policy. Monetary and fiscal policy are tools that government implement to stabilise the. The fiscal policy is designed to ensure full employment, but many nigerians know that such is far from being released since the time of establishment of the policy. Introduction m onetary policy outcomes vary greatly depending on both the target and instrument in use. Associated objectives are those full employment and stable longterm interest rates and real exchange rates.
This paper discusses the evolution of monetary policy in nigeria in the past four decades. Jan 27, 2020 fiscal policy is how congress and other elected officials influence the economy using spending and taxation. To discuss how nigeria can attain desired macroeconomic outcomes through harmonization of fiscal and monetary policies in nigeria, we. Monetary policy addresses interest rates and the supply of money in circulation, and it is generally. This article aims at determining the impact of various components of fiscal policy on the nigerian economy. Monetary policy involves the management of money, the supply of money and interest rate.
Fiscal measures are frequently used in tandem with monetary policy to achieve certain goals. Rationale for coordination between fiscal and monetary policy. It is used along with the monetary policy which the central bank uses to influence money supply in a nation. Specifically, the existence of fiscal dominance, a persistent liquidity overhang, an. Generally, this study will dwell on the overview of monetary policy situations in the nigerian economy. No one is asking for the unrealizable goal of full employment for all. Fiscalmonetary policy and economic growth in nigeria hrmars. Measured against fiscal policy, monetary policy is said to be quicker at. Examine the effect of monetary policy on inflation in nigeria. Fiscal and monetary policy instruments and economic growth. May 05, 2020 both monetary and fiscal policy are maroeconomic tools used to manage or stimulate the economy.
Meanwhile, the international monetary fund imf says nigerias elevated fiscal deficits rely on central bank financing which complicates monetary policy. However, on the other hand, all the fiscal variables significantly reduced unemployment in nigeria. The most important of these forms of money is credit. Jul 01, 2019 premium times july 1, 2019 understanding nigerias monetary policy, by uddin ifeanyi 20190701t08. Fiscal policy is defined as the means by which a government adjusts its levels of spending to monitor and influence a nations economy reem, 2009. In the case of nigeria, ajayi 1974, ajisafe and folorunso 2002 and adefeso and mobolaji 2010 found that monetary policy impacted greater influence than fiscal policy while olaloye and ikhide 1995. We simply used descriptive statistics to show contribution of government fiscal.
The first view calls for monetary policy to achieve price stability, while the second view seeks to achieve price stability and other macroeconomic objectives. Ascertain the effect of monetary policy on cooperant factors in economic growth in nigeria. An econometric analysis of the monetary policy reaction function in nigeria 1 1 1. Monetary policy and central bank of nigeria project. The objectives of monetary policy may vary from country to country but there are two main views. Monetary policy increases liquidity to create economic growth. This is contrary to persuasive monetary policy advice for inflation targeting. Monetary policy refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth. Central bank of nigeria shortterm monetary policy framework in nigeria before 2002, the central bank of nigeria had designed monetary policy in line with fiscal duration of one year monetary policy had always faced the problem of non committal to both intermediate and ultimate targets the optimal longterm policy was not consistent. The objective of fiscal policy is to maintain the condition of full employment, economic stability and to stabilize the rate of growth.
Pdf the fiscalmonetary policy and economic growth in nigeria. Fiscal policy must be designed to be performed in two waysby expanding investment in public and private enterprises and by diverting resources from socially less desirable to. Some of the major instruments of fiscal policy are as follows. Both monetary and fiscal policy are maroeconomic tools used to manage or stimulate the economy. Fiscal policy is used in order to compliment the effect of monetary policy of the central bank of nigeria cbn. This except one was highly significant in reducing the level of unemployment generation in nigeria than monetary.
Overall, the socioeconomic and political milieu, including the legal framework under which the central bank of nigeria has operated, was found to be the critical factor that influenced the outcome of monetary policy. The main objective is to analysis how various components of fiscal policy have contributed to the growth. The paper provides a synthesis of key facts and draws policy. Monetary policy and its effectiveness on economic development. This study investigated the impact of fiscal and monetary policy on nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in nigeria and how gdp growth responds to the monetary and fiscal policy shock. Rising oil prices, new foreign exchange fx measures, attractive yields on government securities, and a tighter monetary policy have contributed to better fx availability, increased reserves to a fouryear high, and contained inflationary pressures. An international monetary fund imf staff team led by amine mati, senior resident representative and mission chief for nigeria, visited lagos and abuja from september 25 to october. Pdf on feb 29, 2016, joseph bidemi obayori and others published fiscal policy and unemployment in nigeria find, read and cite all the research you need on researchgate. A decade later, perspectives on the effectiveness of monetary policy had changed. It is the demand side economic policy implemented by the government to achieve macroeconomic objectives like growth, consumption, liquidity and inflation. Objectives and targets of monetary policy in nigeria.
Monetary and fiscal policy interactions in nigeria. Objectives and targets of monetary policy in nigeria in nigeria, the major objectives of policy are the attainment of price stability and sustainable economic growth. Apr 16, 2020 monetary policy is a central banks actions and communications that manage the money supply. Central bank of nigeria shortterm monetary policy framework in nigeria before 2002, the central bank of nigeria had designed monetary policy in line with fiscal duration of one year monetary policy had. Monetary policy is the process by which monetary authority of a country controls the money supply, interest rates, lending rates and other monetary rates in order to ensure price stability, contribute to economic growth, lower employment, maintain predictable exchange rates and ensure general trust in the currency. The impact of fiscal and monetary policy on nigerian economic growth. Monetary policy and price stability in nigeria december 2006. Generation and nigeria economic development analyzed the monetary and fiscal policy implication nigerias full employment level. If the monetary policy have been effectively used, there will be low inflationary trend in the economy, there by increasing or enhance the purchasing power of the citizens. We simply used descriptive statistics to show contribution of government fiscal policy to economic growth, and to ascertain and explain growth rates, and an ordinary least square ols in a multiple form to ascertain the relationship between economic growth and government expenditure. Monetary policy, growth, development, optiaml rate, foreign investment created date. Fiscal policy is managed by government of any country by cutting or expanding collection of revenue through direct and indirect taxes influencing spending of. It is used in conjunction with the monetary policy implemented by central banks, and it influences the economy using the money supply and interest rates.
An econometric analysis of the monetary policy reaction. Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very shortterm borrowing or the money supply, often targeting inflation or the. Adefeso and others published the fiscalmonetary policy and economic growth in nigeria. Chuku 2010 used quarterly data to explore the monetary and fiscal policy interactions in nigeria between 1970 and 2008. This study reveals that for the nigerian economy fiscal policy is more. An application of a statespace model with markov switching. Fiscal and monetary policy and economic growth in nigeria. Fiscal policy must be designed to be performed in two waysby expanding investment in public and private enterprises and by diverting resources from socially less desirable to more desirable investment channels. Measured against fiscal policy, monetary policy is said to be quicker at resolving economic shocks uniamikogbo and enoma, 2001. Also, okafor, 2012 in his study tax revenue generation and nigeria. Rising oil prices, new foreign exchange fx measures, attractive yields on government securities, and a tighter. In nigeria, the monetary policy is the macroeconomic policy laid down by the central bank of nigeria.
Fiscalmonetary policy and economic growth in nigeria. Monetary policy is the process by which monetary authority of a country controls the money supply, interest rates, lending rates and other monetary rates in order to ensure price stability, contribute to. The objective of fiscal policy is to create healthy economic growth. The impact of fiscal and monetary policy on nigerian. The budget of a nation is a useful instrument to assess the fluctuations. With the end of the civil war in 1970, which disrupted economic activities and an upsurge in wages due to revenues from the oil boom, inflationary trends were noticed in the economy. It is used in conjunction with the monetary policy implemented by central. The publication is aimed at enhancing the knowledge base of users by compiling the concepts and explaining them in a unique, simple and reader. The central bank of nigeria, like other central banks in developing countries, achieve. Monetary and fiscal policy coordination central bank of nigeria. Monetary policy and its effectiveness on economic development in nigeria author. Fiscal policy, public debt and monetary policy in emerging.
Monetary policy is one of the prime economic management tools that governments use to shape economic performance. Babajide, isibor areghan akhanolu and okafor tochukwu subject. In the case of nigeria, ajayi 1974, ajisafe and folorunso 2002 and adefeso and mobolaji 2010 found that monetary policy impacted greater influence than fiscal policy while olaloye and ikhide 1995, philip 2009 and medee and nenbee 2011 argued that fiscal policies are more crucial for economic growth in the country. The study examined the empirical link on the effect of fiscal and monetary policy on the economic growth of nigeria 19862010.
Fiscal and monetary policy and its effect on the growth of nigeria. The article examines the nature of fiscal policies in nigeria using vector autoregression var model. Pdf fiscalmonetary policy and economic growth in nigeria. This is the most important objective of monetary policy in nigeria. The impact of fiscal policy on the nigeria economy economics. This study investigated the effect of fiscal policy on economic growth in nigeria. The nigerian economy is slowly exiting recession but remains vulnerable. Fiscal policy, public debt and monetary policy in emes. Top 8 objectives of fiscal policy economics discussion.
Monetary policy and price stability in nigeria december. The past 10 years have been characterized by an average growth rate of. If the monetary policy have been effectively used, there will be low inflationary trend in the. Economic sustainability and the role of fiscal and. Monetary policy addresses interest rates and the supply of money in circulation, and it is. Monetary policy and central bank of nigeria project topics.
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