The Position of Monetary Policy Mechanism in Controlling Inflation Growth in Nigeria Using Standardized Regression Model

Abstract

This study examined the role of monetary policy mechanism in controlling inflation growth in Nigeria. Standardized Multiple Linear Regression Model (SMLRM) estimating technique was considered as a tool in fitting the model where inflation rate served as response variable and income growth rate, money supply, exchange rate, domestic credit growth rate and government expenditure served as explanatory variables. Data were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin, December 2018 for the period of 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 rate were all statistically significant with 0.00165, 0.000038 and 0.00864 respectively at (0.05). Though, the Real income growth rate and Government expenditure do not appreciably contribute in controlling inflation growth rate. The overall model contributes significantly in controlling inflation growth rate with a p-value of 2.2 x 10-16. The coefficient of determination (R-square) is very high, which implies that the model best captured the control of 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 in Nigeria.