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Rivers State University, Port Harcourt.
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| Title: | Monetary Policy Instruments And Private Consumption Spending In Nigeria |
| Author(s): | EZE Titus Chinweuba & IORTYER Dominic |
| Abstract: | The study investigated the impact of monetary policy instruments on private consumption spending in Nigeria from 1981 to 2020. The research adopted multiple regression analysis in which Vector Error Correction Model and Granger causality test were utilized in the analysis. Data on private consumption expenditure (PCE), broad money supply (M2), Interest rate (INTR), exchange rate (EXR) and inflation rate (INFR) were analyzed in the study. The results showed that apart from exchange rate, all other monetary policy variables employed in this study were revealed to be significant in the determination of consumption spending in Nigeria. The insignificance of exchange rate may have resulted from the fall in the demand for domestically produced goods and services in spite of the increased campaign by several government agencies to change peoples' preferences in favor of domestically produced goods and services. The Granger causality test which revealed a unidirectional causality running from CPI to PCE is a pointer to the fact that government policies towards moderating the price level such as inflation targeting will positively impact on consumer spending, and through the multiplier effect increase economic growth and the general standard of living. Therefore, the study recommends that the monetary authority should formulate and implement monetary policies that would ensure optimal money stock which will in turn reduce interest rates without creating excess liquidity. The effort of CBN towards inflation targeting is a step in the right direction and should be pursued more vigorously. This will reduce inflation and the price level whereby consumption spending will rise, and through the multiplier effects, economic activities and national income will rise as well. |
| Keywords: | Multiple Regression, Monetary Policy, Pairwise Granger causality, Unidirectional Causality, Multipli |
| Journal: | Journal of Contemporary Research in Economics and Development Studies (JCREDS) |
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