Monetary Policy Effectiveness and Inflation Stabilization: Implication for Sustainable Economic Development in Nigeria.

Inflation has been a significant issue to economic stability and growth in many economies including developing economies such as Nigeria. The rising can erode the purchasing power and further reduce investment and disrupt economic planning which undermine development efforts. In spite the implementation of various monetary policies in order to combat inflation in Nigeria, the economy continues to experience volatility which is characterized by inconsistent inflation rate that affect both business and consumer. Motivated by this critical context, this study examines the effectiveness of monetary policy and inflation in Nigeria and its implication for economic development 1990-2024. This study made use of Autoregressive distributed lag (ARDL) model. This study explores both the short run and long run relationship among key monetary variables. The findings reveals that in the short run, monetary policy rate (MPR) significantly increases inflation although the lag of MPR reveals partial reversal, which reflect fluctuations in policy effectiveness. Liquidity ratio (LR) was found to consistently reduce inflation while the exchange rate (EXCR) was found to exhibit a delayed positive adjustment effect. The GDP growth rate was found to negatively impact inflations in both short and it lagged periods. In the long run MPR was found to remain a major driver of inflation with a strong and positive relationship while cash reserve ratio CRR effectively serve as a tool for disinflation. However, LR and EXCR are found to be statistically insignificant in the long term. Based on the findings this study recommend that the policy makers should adopt a more integrated and flexible monetary policy framework which takes into account various divergent effectiveness of different tools in both short run and long run periods

Inflation, Monetary Policy, Economic

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