Introduction of higher currency notes in Nigeria and the dynamics of inflation (1980-2014)

Taiwo, J.N. and Ogunwale, Oluwayinka O and Afieroho, Evawere O (2016) Introduction of higher currency notes in Nigeria and the dynamics of inflation (1980-2014). Basic Research Journal of Business Management and Accounts, 5 (4). pp. 42-60. ISSN 2315-6899

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Abstract

The dynamics of inflationary trends, which has been a macroeconomic concern in Nigeria over the last decade, is considered to be very hazardous to the aggregate economic activity of any country. In order to determine the practical effect of higher currency note introduction on the Nigerian economy, an empirical investigation on the casualty between inflation, currency denomination, fiscal deficit and broad money supply was carried out using the Vector Error Correction Model (VECM) and the Vector Autoregressive (VAR) Model (Forecast Variance and Impulse Response) model. Time series data of 1980 to 2014 were employed and the results confirm that in the long run there is a relationship between inflation, currency denomination, fiscal deficit and broad money supply. The Cholesky ordering (currency denomination, inflation, fiscal deficit and broad money supply) is used in the VAR estimates, which indicates that the shocks in currency denomination affect the other variables and result to inflation. It is therefore recommended that the Nigerian government should implement inflation management policies and also ensure that lower currency notes in circulation are more than higher currency notes in circulation.

Item Type:	Article
Uncontrolled Keywords:	Inflation, Currency Denomination, Fiscal Deficit, Broad Money Supply
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HG Finance
Divisions:	Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User:	Mrs Hannah Akinwumi
Date Deposited:	03 Feb 2017 10:30
Last Modified:	03 Feb 2017 10:30
URI:	http://eprints.covenantuniversity.edu.ng/id/eprint/7730

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