Economic and Financial Review

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Browsing Economic and Financial Review by Author "Adamgbe, Emmanuel T."

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    Does government spending undermine monetary policy in Nigeria?
    (Research Department, Central Bank of Nigeria, 2012-09) Adamgbe, Emmanuel T.; Golit, Peter D.; Okafor, lzuchukwu l.
    In Nigeria, anecdotal evidence suggest that the fiscal/operations of government, especially disbursements from the Federation Account to the three-tiers of government, had over the years created liquidity challenges requiring aggressive monetary management. Against the background, this paper addresses two questions: (i) Does government spending have significant spill-over effects on inflation in Nigeria? (ii) Does government, spending induce a concomitant response by the CBN? ln addition, unlike the sparse literature in Nigeria on these two issues, which essentially relies on constant parameter model we use of time-varying parameter vector autoregressive (TVP-VAR) model with stochastic volatility. Applying this framework allows us not only to identity the general relationship between the variables of interest; it also permits us to understand the dynamics of these variables over time in line with the underlying macroeconomic structure of the economy. The posterior estimates of the means show that the response of inflation government spending shock was relatively stable for the period prior to 1990 over the estimation sample. A tendency to elevate prices became pronounced became more and 2011. Concomitantly, short-term interest role (prime lending rate) had shown greater variability in terms of its response lo government expenditure shocks in the period 1991 to 2011 as in the case of inflation
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    Structural breaks in some selected WAMZ macroeconomic time series
    (Central Bank of Nigeria, 2011-09) Adamgbe, Emmanuel T.; Agu, Cletus C.
    Anecdotal evidence shows that country-specific inflation has remained largely persistent and heterogeneous across the West African Monetary Zone (WAMZ). Uncertainty about the nature of inflation persistence often undermines regional convergence due to the asymmetric responses from monetary authorities. Consequently, the objective of this paper is to identify whether or not structural breaks exist in the price level of member countries. The paper uses the method of Lee and Strazicich (2003) with multiple breaks to identify if there were spurious rejections in the ADF tests of selected macroeconomic variables of WAMZ countries. The result fails to reject the existence of the null hypothesis of unit root for fifteen (15) variables and a second root for twenty (20) variables. With the exception of Ghana, the CPI for other member countries has a second root, indicating that inflation is explosive with hysteresis effect. This feature of inflation is associated with a similar structural dysfunction in other macroeconomic indicators, including the exchange rate, nominal gross domestic product, money supply and the lending rate. In other words, breaks in these fundamentals are important sources of persistence and hysteresis in the price level.
Central Bank of Nigeria