Abstract
Purpose: One of the known global consequences of inflation is increasing and causing poverty. Most studies follow suit and empirically investigated the effect of inflation on poverty without taking into cognizance that poverty might as well cause inflation. The main aim of this study is to investigate the nature of causality between inflation and poverty in Nigeria.
 Methodology This research work employs the famous Toda-Yamamoto causality test to investigate the nature of causality between inflation and poverty in Nigeria for the period 1980-2016, with money supply and exchange rate as control variables.
 Findings: The results reveal that there is bidirectional causality between inflation and poverty, none of the variables cause money supply and none of them cause exchanges rate.
 Implication: Even though the money supply does not cause poverty directly, it does cause inflation, and inflation in turns causes poverty. Also, the exchange rate does not cause inflation directly, but it does cause poverty, and at the same time, poverty causes inflation. Therefore, the study calls the attention of the policymakers to be cautious in making policies concerning money supply and local currency devaluations (exchange rate) as they cause both inflation and poverty directly and indirectly, consequently, they affect the societal welfare in general.
Highlights
High persistent rise in general price level combined with high level of poverty are among the major challenges facing most developing nations
Variables used include: Inflation rate which is in percentage, it measures the persistence of general price changes in an economy and is calculated using the Laspeyres Index, while Household final consumption expenditures per capita growth is used as a measure of poverty
All the variables are normally distributed with the exception of the inflation rate, given their respective JarqueBera statistics and its corresponding probability
Summary
High persistent rise in general price level combined with high level of poverty are among the major challenges facing most developing nations. One of the consequences of high inflation rate is increasing the rate of poverty This theoretical presumption has been confirmed by many empirical studies such as Easterly and Fischer (2001), Powers (1995) and Yolanda (2017). Ahmad, Bashir and Hussain (2018) maintained that high level of poverty adversely affects the happiness of any society. It is among the crucial issues faced by all nations (Nujum & Pratiwi, 2018; Rahman, Choudhry & Farooq, 2018)
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