The study was conducted to evaluate the impact of inflation on economic growth in the context of an emerging market using empirical evidence from Nigeria. Using time series data spanning forty one years (1970-2011) which was obtained from the Central Bank of Nigeria (CBN) statistical bulletin volume 22, and Central Bank of Nigeria official website, the nature of the relationship existing between the focus variables - economic growth (proxied by real Gross Domestic Product, GDP) and inflation rate was explored. The Augmented Dickey Fuller (ADF) and Philip-Perron (PP) tests were used to test for the stationary of the variables while the granger causality test was employed to ascertain the direction of influence between inflation and economic growth in Nigeria.
The follow research questions guided this study: What is the trend of inflation in Nigeria? Why have all the policies used unable to reduce inflation rate to an acceptable level? What is the impact of inflation of Nigerian economic growth? Inflation growth has been the macro-economic problem in Nigeria that seems to be intractable over the years; Nigeria government has adopted various measures (both monetary and fiscal policies) to curb or reduce inflation growth to an acceptable level but all these policies seem to have no effects. This gave rise to the following research questions.
Table of Contents
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Purpose of the Study
1.4 Research Questions
1.5 Statement of Hypothesis
1.6 Significance of the Study
1.7 Limitation of the Study
1.8 Scope of the Study
1.9 Organization Of The Study
2.0 REVIEW OF RELATED LITERATURE
2.1 CONCEPTUAL FRAMEWORK
2.2 EMPIRICAL LITERATURE
3.0 RESEARCH METHODOLOGY
3.1 Research Design
3.2 Method of Data Analysis
3.3 Model Specification
3.4 Estimation and Validation Of The Models Unit root test
4.0 DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS
4.1 Presentation of Data
4.2 Analysis of Data
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendation
Research Objective and Core Themes
The primary objective of this study is to empirically evaluate the impact of inflation on economic growth in Nigeria using time series data from 1970 to 2011, and to determine the direction of influence between these variables.
- Analysis of the relationship between inflation and real Gross Domestic Product (GDP).
- Application of econometric tests including Augmented Dickey-Fuller (ADF) and Granger causality.
- Evaluation of monetary and fiscal policy effectiveness in managing inflation.
- Examination of "debt erosion" strategies via inflationary policy as an alternative to debt forgiveness.
Excerpt from the Book
1.1 Background of the Study
A macro-economic problem facing Nigeria and the most disturbing is the problem of inflation. As a result of its growing rate, Nigerian government is concerned about its impact on her economic growth. Though much has been written about inflation, all the authors agree that it has an impact on Nigerian economic growth.
Samuelson (1973) defines inflation as a "general rising prices for breeds, cars, haircuts, rising wages, rent e.t.c. Onwukwe (2003), on his side defines inflation as a significant and sustained rise in the general price level or a declining value of the monetary units.
During inflationary period, fixed amount of money buys less quantity of goods and services. The real value of money is drastically reduced i.e. the purchasing power of money of consumers are reduced.
Having a little view on the impact of inflation in Nigeria economy and realizing that the problems caused by the impacts of inflationary growth is becoming unbearable to the citizens and the entire economy, it becomes necessary to critically analyse the impact of inflationary on Nigerian economic growth.
Summary of Chapters
1.1 Background of the Study: Introduces inflation as a critical macro-economic challenge in Nigeria and establishes the necessity of analyzing its impact on economic growth.
1.2 Statement of the Problem: Discusses the intractability of inflation in Nigeria despite various government monetary and fiscal policy interventions.
1.3 Purpose of the Study: Outlines the core objectives, which include determining the impact of inflation on growth and providing recommendations to monetary authorities.
1.4 Research Questions: Specifies the guiding queries regarding inflation trends and the failure of past policies.
1.5 Statement of Hypothesis: Defines the null and alternative hypotheses regarding the significance of inflation's impact on Nigerian economic growth.
1.6 Significance of the Study: Highlights the relevance of the research for policy makers, banking institutions, and students of economics.
1.7 Limitation of the Study: Notes constraints such as time, finance, and limited access to specific data sources.
1.8 Scope of the Study: Defines the temporal range of the analysis, covering the Nigerian economy from 1970 to 2011.
1.9 Organization Of The Study: Provides a structural overview of the five chapters contained in the research.
2.0 REVIEW OF RELATED LITERATURE: Explores theoretical definitions of inflation and existing empirical studies concerning its causes and effects.
2.1 CONCEPTUAL FRAMEWORK: Defines the concept of inflation, its causes (monetary and non-monetary), types, and general economic effects.
2.2 EMPIRICAL LITERATURE: Reviews previous studies and academic perspectives on the relationship between inflation, money supply, and output growth in Nigeria and other countries.
3.0 RESEARCH METHODOLOGY: Details the econometric approach, including the OLS model and unit root tests used to analyze the dataset.
3.1 Research Design: Describes the use of time series data and secondary sources from the Central Bank of Nigeria.
3.2 Method of Data Analysis: Outlines the implementation of Johansen co-integration and Granger causality tests.
3.3 Model Specification: Presents the functional relationship between GDP and the inflation rate used for the regression analysis.
3.4 Estimation and Validation Of The Models Unit root test: Explains the procedure for testing variable stationarity to avoid spurious regression results.
4.0 DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS: Provides the empirical data and the results of the statistical tests conducted.
4.1 Presentation of Data: Tabulates the annual figures for Real GDP, inflation rates, and GDP growth for the study period.
4.2 Analysis of Data: Interprets the regression results, identifying a statistically significant positive relationship between inflation and economic growth.
5.1 Summary of Findings: Summarizes the key discovery that inflation may be utilized to erode debt burdens, alongside the conclusion on contemporaneous effects.
5.2 Conclusion: Reconfirms the positive relationship and the lack of a leading variable in the causality analysis.
5.3 Recommendation: Advises the government to consider the inflationary paradigm for debt management while simultaneously striving for single-digit inflation rates.
Keywords
Inflation, Economic Growth, Gross Domestic Product, Nigeria, Time Series, Granger Causality, Monetary Policy, Fiscal Policy, Debt Burden, Econometrics, ADF Test, Phillips-Perron, Co-integration, Regression Analysis, Macro-economics.
Frequently Asked Questions
What is the fundamental focus of this research?
The research examines the impact of inflation on the economic growth of Nigeria, analyzing empirical data from 1970 to 2011 to understand their long-term relationship.
What are the primary thematic areas explored?
The study covers the theoretical background of inflation, empirical literature on macroeconomic stability, econometric modeling of GDP, and the effectiveness of policy interventions.
What is the core research objective?
The objective is to determine how inflation influences Nigeria's economic growth and to assess whether there is a causal direction between the two, ultimately offering recommendations for debt management.
Which scientific methodology is applied?
The study utilizes time series analysis, employing Ordinary Least Square (OLS) estimation, the Augmented Dickey-Fuller (ADF) test, Philip-Perron (PP) tests, and Granger causality tests.
What is covered in the main body of the work?
The main body includes a literature review, the specification of the research model, rigorous data analysis through econometric software, and a presentation of regression results.
Which keywords define this work?
Key terms include Inflation, Economic Growth, Nigeria, Granger Causality, Debt Burden, and Monetary Policy.
What does the study conclude about the relationship between inflation and growth in Nigeria?
The study finds a statistically significant positive relationship between inflation and economic growth, concluding that the effect is contemporaneous rather than leading.
What specific strategy does the author suggest for the Nigerian government regarding debt?
The author suggests that instead of pursuing costly debt forgiveness negotiations, the government could utilize the "bad era" of double-digit inflation to effectively "inflate away" the country's existing debt burden.
Does the study advocate for high inflation?
Not entirely; while it highlights the potential benefits of inflation for debt erosion, it also recommends that the government strive to bring inflation down to single digits to mitigate long-run negative effects.
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- Micah Effiong (Autor:in), 2016, Impact of inflation on economic growth in Nigeria in the context of an emerging market, München, GRIN Verlag, https://www.grin.com/document/510336
