EFFECT OF MONEY SUPPLY ON ECONOMIC GROWTH IN NIGERIA 1980 TO 2018
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
EFFECT OF MONEY SUPPLY ON ECONOMIC GROWTH IN NIGERIA 1980 TO 2018
CHAPTER ONE INTRODUCTION
BACKGROUND FOR THE STUDY
Economic growth gives critical information to the government, investors, foreign communities, and non-governmental organisations (NGOs). This information includes the economy’s size, growth rate, GDP per capita, and so forth.
That is why scholars and researchers have begun to investigate the relationship between economic growth and the elements that influence its success or failure. One of these aspects is the money supply.
The relationship between the money supply and economic growth has a theoretical basis. According to the Keynesian Theory of Growth, the supply of money influences the equilibrium value of output and employment because a rise in the money supply raises bond prices, lowers interest rates, and increases investment and output.
It should be noted that in classical theory of inflation, the quantity theory of money explains the influence of money supply as either raising or reducing prices, depending on whether the supply of money is increased or decreased. This demonstrates that if money growth matches improvements in real GDP, there will be no inflation (William, 2016).
Other experts have expressed their perspectives on how the money supply is related to economic growth. According to Laidler (1993), rising interest rates would reduce the money stock and thus the GDP.
Handler (1997) argued that variations in the quantity of money supply are the most important determinant of economic growth, and that nations that devote more time to studying the behaviour of aggregate money supply are less likely to experience poor economic performance, a view shared by some economists.
Steve (1997) and Domingo (2001) argued that positive economic growth may not be possible without adequate financial conditions. According to Uduakobong (2014), the money supply has a moderate influence on economic growth.
In recent years, more attention has been paid to the relationship between money supply and economic growth than to any other topic in monetary economics. Economists disagree on the impact of money supply on economic growth.
While some (e.g., handle 1997) agreed that variations in the quantity of money are the most important determinant of economic growth and that countries that devote more time to studying the behaviour of aggregate money supply experience significant variations in their economic activities, others are sceptical of the role of money in gross national income (Robinson 1950, 1952).
Since 1980, evidence has revealed that there is a link between Nigeria’s money supply and economic development or activity. Nigeria has been able to govern its economy over the years by varying its money supply.
As a result of the oil price drop in 1981 and the balance of payment (BOP) imbalance that occurred during this time, several stabilisation methods spanning from fiscal to monetary policy were adopted. Ikhide and Alwoda (1993) determined that increasing interest rates would reduce the stock of money, lowering the gross national product.
Thus, the idea that money supply varies with economic activity applies to the Nigerian economy. As previously demonstrated, the money supply has a significant impact on economic activity in both developed and emerging nations.
The insufficient supply of monetary aggregates in general, and money stock in particular, was the root cause of many African countries’ failure to achieve growth and development.
Various experts have attributed much of the blame for the inability of monetary policies to transfer into economic growth to the government and its institutions, citing poor implementation and sincerity on the side of policymakers.
Need help with a related project topic or New topic? Send Us Your Topic