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Testing Long-Run Neutrality Propositions in a Developing Economy: The Case of Nigeria

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Following the eclectic methodology by King and Watson (1997), the paper uses post independence quarterly data to examine the validity of two long-run neutrality propositions in Nigeria. Overall, there is qualified evidence that suggests the existence of long-run monetary neutrality and evidence that refutes the existence of the long-run Fisher relation between prices and interest rates. The evidence on long-run monetary neutrality is qualified because it holds under assumptions of contemporaneous money exogeniety and contemporaneous money neutrality. As a consequence, our results inform our deductions about the ineffectiveness of the Monetarist anti-inflationary prescriptions for managing the macroeconomy of a developing economy like Nigeria. Pursuing a synchronized and coordinated fiscal-monetary policies framework is likely to yield the desired results on real economic variables.

Abstract

Following the eclectic methodology by King and Watson (1997), the paper uses post independence quarterly data to examine the validity of two long-run neutrality propositions in Nigeria. Overall, there is qualified evidence that suggests the existence of long-run monetary neutrality and evidence that refutes the existence of the long-run Fisher relation between prices and interest rates. The evidence on long-run monetary neutrality is qualified because it holds under assumptions of contemporaneous money exogeniety and contemporaneous money neutrality. As a consequence, our results inform our deductions about the ineffectiveness of the Monetarist anti-inflationary prescriptions for managing the macroeconomy of a developing economy like Nigeria. Pursuing a synchronized and coordinated fiscal-monetary policies framework is likely to yield the desired results on real economic variables.

참고문헌 (44)

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