Mathematics and Statistics Department, Faculty of Science, Federal University Otuoke, Bayelsa State, Nigeria.
Research Article
World Journal of Advanced Research and Reviews, 2024, 22(02), 713-723
Received on 30 March 2024; revised on 09 May 2024; accepted on 11 May 2024
The recent jump up in the prices of goods and services in Nigeria despite government policy interventions has triggered new research towards finding solutions to curbing this economic menace. This study examines whether the interest rate, exchange rates, external debt and money supply can curb inflation in Nigeria. The proxy measures of the variables under study, such as; 3-month deposit rate (ITR3), naira\1 Us dollar exchange (EXR), government external debt (ETD), money supply (MS) and consumer price index (CPI) data used cover the period from January 1981 to December 2022. Statistical tools such as; order of integration, the Johansen co-integration test, vector error correction (VEC) model, and residual diagnostic test were adopted. The result shows that the variables except ITR3 are integrated order one and ITR3 is stationary in its normal level. The Johansen co-integration test indicates the existence of one co-integrating equation significant at 0.05 level. The estimates of the VEC model specify that of all the explanatory variables considered only 3-month deposit rate has a strong impact on inflation both in the short-run and long-run, while exchange rate has a weak effect on inflation. However, this result can form a basis to re-assess the monetary policy rate in order to control inflation in Nigeria.
Exchange Rate; External Debt; Interest Rate; Money Supply; Inflation; VEC Model
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Chibuzo G. Amaefula and Ovieneyi L. Egba. Do money supply, interest rates, external debt and exchange rates explain inflation in Nigeria? An econometric approach. World Journal of Advanced Research and Reviews, 2024, 22(2), 713-723. Article DOI: https://doi.org/10.30574/wjarr.2024.22.2.1421