Abstract
In an attempt to examine the influence of inflation on the growth prospects of the Nigerian economy, the study employs the autoregressive distributed lag on the selected variables, i.e. real gross domestic product (GDP), inflation rate, interest rate, exchange rate, degree of economy`s openness, money supply, and government consumption expenditures for the period 1980–2018. The study findings indicate that inflation and real exchange rate exert a significant negative impact on economic growth, while interest rate and money supply indicate a positive and significant impact on economic growth. Other variables in the model depict no influence on the economic growth of Nigeria. The causality result shows the unidirectional relationships between interest rate, exchange rate, government consumption expenditures and gross domestic product. However, inflation and the degree of openness show no causal relationship with gross domestic product. As a result, the study recommends that a more pragmatic effort is needed by the monetary authorities to target the inflation vigorously to prevent its adverse effect by ensuring a tolerable rate that would stimulate the economic growth of Nigeria.
Highlights
Amidst the debilitating macroeconomic problems that had received serious attention from financial analysts, policymakers, and the monetary officials in both developed and developing countries of the world is the relationship between the inflation and economic growth (Ndoricimpa, 2017; Seleteng, Bittencourt, & Van-Eyden, 2013)
This study investigates whether inflation is detrimental to economic growth of Nigeria for the peri
The study shows that inflation is one of the macroeconomic variables that undermine the growth of an economy
Summary
Amidst the debilitating macroeconomic problems that had received serious attention from financial analysts, policymakers, and the monetary officials in both developed and developing countries of the world is the relationship between the inflation and economic growth (Ndoricimpa, 2017; Seleteng, Bittencourt, & Van-Eyden, 2013). The result shows that the rate of inflation is inversely related on economic growth, Employing Johansen co-integration and Granger while the exchange rate and interest rate indicate causality test, Denbel et al (2016) investigate if a direct impact on the economy. The results in- tive relationship, exchange rate shows a significant dicate long-run relationship between government positive relationship, while there is a negative insize and consumer price index, while there is no significant relationship between interest rate and causal relationship between the two variables, and growth of Nigeria economy. Chude and Chude (2015) employ time-series data Following all these empirical studies, it is evident from 2000 to 2009 using ordinary least squares re- that consensus has not been reached on the subgression estimation technique to examine the in- ject matter This has paved the way for fluence of inflation on economic growth of Nigeria. Growth of the economy. Olu and Idih (2015), using least squares method, analyze the influence of inflation on economic growth of Nigeria from 1980
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