A re-examination of the demand for money in Nigeria |
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Authors: | Augustine C. Arize Elizabeth J. Lott |
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Affiliation: | (1) North Texas State University, USA |
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Abstract: | Summary and Conclusion This paper reexamines the demand for money in Nigeria and finds the real income and the expected rate of inflation to be important independent variables that explain over 80 percent of the variation in the real cash balance. The study shows that, in view of the low per capita income of Nigerians, permanent income and measure income are largely the same. An important finding of this study is that, because their price level is (in large part) exogenously determined, the monetary authorities in Nigeria should be more desirous of following the constant growth rate rule. A very substantial part of the country's export (that is, oil) is especially prone to inflationary pressures due to the ease with which international inflation can be transmitted. Since the authorities can control money stock, this ‘rule’ is indicated from both the theoretical and the empirical standpoint. |
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