Modelling Monetary Policy Mechanism in Driving the Control of Inflation Growth in Nigeria

Abstract

The study examined Modeling Monetary Policy Mechanism in Driving the Control of Inflation Growth In Nigeria. Multiple Linear Regression Model (MLRM) estimating technique was adopted as a tool in fitting the model where inflation rate serves as response variable and income growth rate, money supply, exchange rate, domestic credit growth rate and government expenditure served as explanatory variables. Data made use of were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin, December 2018, between 1998 to 2018. The R-Statistical software package was adopted to carry out the analysis. The result of the P-value of Money supply, Exchange rate and Domestic credit growth were all statistically significant with 0.00233, 0.0000696 and 0.01131 respectively at (0.05). Though, the real income growth rate and government expenditure do not appreciably contribute to controlling the inflation growth rate. The overall model contributes significantly to controlling the inflation growth rate with a P-value of 1.138 x 10-15. The coefficient of determination (R-square) is very high which implies that the model best captured the control of the inflation growth rate that is being considered. The study however concluded that three of the explanatory variables made much significant impact in controlling inflation growth rate in Nigeria.