An Appraisal of Monetary Policy and its Effect on Macro Economic Stabilization in Nigeria

Abstract

This study appraised monetary policy development in Nigeria and also examined the effect of monetary policy on macroeconomic variables in Nigeria for the period 1986 to 2009. The study adopted a simplified Ordinary Least Squared technique and also conducted the unit root and co-integration tests. The findings of the study showed that monetary policy have witnessed the implementation of various policy initiatives and has therefore experienced sustained improvement over the years. The result also shows that monetary policy had a significant effect on exchange rate and money supply while monetary policy was observed to have an insignificant influence on price instability. The implication of this finding is that monetary policy has had a significant influence in maintaining price stability within the Nigeria economy. The study concluded that for monetary policy to achieve its other macroeconomic objective such as economy growth; there is the need to reduce the excessive expenditure of the government and align fiscal policy along with monetary policy measure.

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