INFLATION THRESHOLDS AND ECONOMIC GROWTH: EVIDENCE FROM NIGERIA
Journal Title: Asian Economic and Financial Review - Year 2012, Vol 2, Issue 7
Abstract
Inflation is one of the most challenging macroeconomic objectives capable of frustrating every pragmatic effort at achieving other macroeconomics goals if not curtailed. To this end, the paper empirically examines the threshold inflation rate that is considered optimally reasonable for maintaining a sustainable economic growth. The study in specific terms employs a least square multivariate approach to estimate a threshold level of inflation. Further, error correction modeling (ECM) approach was explored to identify the long run relationship among other major determinants of real GDP growth using a simple augmented production function. In addition, a pairwise granger causality test was conducted to explore the causal link between the inflation and growth of real GDP. Interestingly, it was observed from the causality test that there was neither bidirectional nor unidirectional causality between the two but rather an independent relationship. The findings from least square estimation also established 9% threshold inflation level. The results from ECM confirmed the values of lagged of real GDP growth rates, investment, current inflation, population growth and terms of trade as important factors affecting growth rates of real GDP in Nigeria. Based on the outcome of the results it was therefore suggested that an identification of country-specific inflation thresholds in the inflation-growth relationship might provide useful information about the appropriate location and width of an inflation targeting band.
Authors and Affiliations
Kazeem Bello Ajide| Department of Economics University of Lagos, Lagos, Nigeria, Olukemi Lawanson| Department of Economics University of Lagos, Lagos, Nigeria
Keywords
Related Articles
- EP ID EP1839
- DOI -
- Views 506
- Downloads 36
MARKET REACTION TO DIVIDEND INITIATION ANNOUNCEMENTS ON THE GHANA STOCK EXCHANGE: THE CASE OF INDUSTRIAL ANALYSIS
This study examines the market?s reaction to dividend initiation announcements. In particular, it considered the magnitude of abnormal returns during the days that surround announcements of dividend initiation. This stud...
Assessing Determinants of Macroeconomic Policy on Real Convergence and Growth: A Comparative Study of the Eurozone and ASEAN
This study mainly examines the role of macroeconomic policy variables associated with Maastricht Convergence Criteria (MC), using various approaches to analyze comparatively differences in growth and convergence in incom...
SINGAPORE'S TEMASEK HOLDINGS’ CONTROL MECHANISMS AND THE PERFORMANCE OF THE FIRMS CONTROLLED BY TEMASEK
This paper examines the control mechanisms of Singapore?s Temasek Holdings and the performance of the firms controlled by Temasek. The data were hand-collected from a wide range of data sources and the sample period cons...
IMPACT OF GOVERNMENT SPENDING ON PRIVATE CONSUMPTION USING ARDL APPROACH
This study investigates the impact of government spending on private consumption a case study of China. We used Autoregressive Distributed Lag (ARDL) approach to estimate the long and short run effects of the model using...
SECURITY ISSUANCE AND STOCK PRICE EFFECTS WITH HETEROGENEOUS BELIEFS
We analyze the factors that affect security issuance and its impacts on the volatility of stock returns before and after the issuance under heterogeneous beliefs and short sale constraints using the issuing sample of con...