Inflation And Economic Growth Nexus In Nigeria

Authors

Adamu Jibrilla, Bawuro Mohammed Buba

Abstract

This study was conducted on the “Inflation and Economic Growth Nexus in Nigeria” using annual time series data from 1961 to 2014. The aim of the study was to determine the relationship between inflation and economic growth in Nigeria for a longer period of 54 years. This study was organized into five different sections. Section I was on introduction, section II was on literature review and empirical literature, section III dealt with the methodology of the study, section IV was on the results and discussions while section V was on conclusion and recommendations. Preliminary tests of stationarity were conducted and the series under investigation were found to be I(0) variables. The study employed the use of Ordinary Least Squares method, Johanson Cointegration method, Error Correction mechanism and Granger Causality method to ascertain both the impact of inflation on economic growth as well as the relationship between the two variables. The result of the OLS regression analysis revealed a negative impact of inflation on economic growth in Nigeria, although the coefficient is statistically insignificant which implied that inflation does not influence economic growth in the country over the sample period. The cointegration test result indicated the existence of a long-run equilibrium relationship between inflation and economic growth in Nigeria. The error correction term was correctly signed and statistically significant which confirmed that the two variables under study converge towards a long run equilibrium relationship but the speed of adjustment appeared to be slow as only 17% of the error was being corrected each year. The Granger causality test result showed that there was no either unidirectional or bidirectional causality between inflation and economic growth in Nigeria from 1961 to 2014. Based on the findings of this study, it was recommended that both fiscal and monetary policy measures be taken to reduce inflation rate in Nigeria.

Keywords

Economics

Inflation And Economic Growth Nexus In Nigeria. Adamu Jibrilla, Bawuro Mohammed Buba. 2016. IJIRCT, Volume 2, Issue 3. Pages 78-83. https://www.ijirct.org/viewPaper.php?paperId=IJIRCT1601014