IS MONETARY POLICY THE BEST INSTRUMENT FOR INFLATION TARGETING IN THE NIGERIAN ECONOMY?
Job Pristine Migap
Department of Economics
Kwararafa University, Wukari
E-mail: keffi4942@yahoo.ca
ABSTRACT
Since the debasement of money emerged, particularly during the 17th and 18th centuries when precious metals were still being used as coins in continental Europe & North America, whereby governments and monarchs often combined gold coins with other metals such as silver, copper or lead and reissue them at the same nominal value, the intrinsic value attached to each metallic coin declined. Consumers who used them had to pay higher prices (more coins) for the same quantity of goods and services than was the case in the past. Price inflation was therefore, a fall-out of monetary inflation. It is in this context that price inflation is essentially considered as a monetary phenomenon. But, does it mean that inflation can only be controlled through monetary policy? This paper, answer in the negative. Reviewing literature on conceptual and empirical issues on monetary policy, inflation, and fiscal policy; this paper posits that inflation in Nigeria though a monetary phenomena is essentially supply oriented in nature and can best be controlled by fiscal policy measures. It therefore suggests that government should put in place the necessary infrastructures that would lower the cost of production (supply side-economics) in the economy and enhance output thereby achieving its inflation targeting regime.
Keywords: Price Inflation, Monetary Inflation, Monetary Policy, Fiscal Policy, Inflation, Inflation Targeting, Economy, Nigeria, Supply Side-Economics.