MONETARY POLICY REGIMES AND MACROECONOMIC PERFORMANCE IN NIGERIA

Abstract

The study examines the effectiveness of monetary policy in influencing macroeconomicperformance during the monetary targeting and inflation targeting regimes. Money supplyand interest rate are the two policy instruments for the two regimes. The study employedautoregressive distributed lag to estimate variables such as gross domestic product,inflation, exchange rate, total government expenditure, public debt, oil price, per capitaincome, investment, and unemployment. The study uses annual secondary data that issourced from the central bank of Nigeria statistical bulletin and world developmentindicator (online version) between 1986 and 2021. Results show that monetary policy is noteffective in influencing macroeconomic performance during the monetary targeting regimeas an increase in the stock of money is used for the importation of finished goods. However,monetary policy performs better under the inflation-targeting regime with an interest rate asthe policy instrument. The study concludes that inflation targeting should be made explicit inthe country and therefore, recommended that interest rate should be the nominal anchor inNigeria.