CBN Monetary Policy and Inflation Nexus in Nigeria: An empirical approach

Purpose: The study explored monetary policy effect on inflation stabilization in Nigeria. Increasing levels of indebtedness may have reduced the fiscal space for fiscal policy intervention and this leaves monetary policy as the real tool of choice for macroeconomic stabilisation. The question we need to ask then is, how effective is this tool of choice?Methodology: Monthly time series data from 2009-2018 were used in estimating the model. The ADF test for the stationarity, the johansen cointegration test and the vector error correction model were utilized in testing the variables. The findings from the unit root test did indicate stationarity at first difference 1(1). The cointegration (Johansen) test indicates that there was a nexus linking inflation and all the regressors adopted in the long term.Findings: The result of the VECM for the two estimated models shows a self-equilibrating mechanism of 14 per cent and 32 per cent for the first and second models respectively. The findings further reveal that the variables; liquidity ratio, policy rate (MPR), exchange rate, reserve requirement and treasury bills rate all had an effective impact on the inflation rate and that that effect was very significant. Hence, the CBN's monetary policy shocks do seem to have the expected traction on the Nigerian economy.Unique Contribution: The results make it pertinent for the CBN to utilize all the policy measures adopted in order to keep inflation within acceptable thresholds and prepare to keep inflation within the targeted range of 6-9 per cent, no matter the anticipated or unanticipated strong head winds.

Uang Fiat dan Operasi Pasar Terbuka: Tinjauan Ekonomi Islam

This article aims to discuss monetary policy in Indonesia, namely Open Market Operations (OPT) on Islamic economics perspective. OPT known as the monetary instrument, which most often used to achieve policy objectives. In general, monetary targets aimed to stimulate the economic growth and inflation stabilization. OPT’s policy products included Bank Indonesia Certificates (SBI), Sharia Bank Indonesia Certificates (SBIS), Bank Indonesia Wadiah Certificates (SWBI), Government Securities (SUN), Sukuk, Private Bonds, Rupiah Interventions (IR), and Loan Facilities Bank Indonesia (FASBI) which is traded on the money market; the primary market and the secondary market with an auction system. Currently, All OPT products based on fiat money. The buy and sell system of OPT products uses a discount system and interest rates. Money plays an important role in the economy, so the policy of monetary contraction and expansion of the amount of money circulating in society will affect the velocity of money. With a descriptive analysis, this article analyzes the role of fiat money from the perspective of Islamic economics. This article argues that the three schools of thought in Islamic economics agree that the function of money used as a means of transaction, investment, and precaution. As an exchange style, money unable to be used as a means of future speculation. Thus, the Islamic economy views that underlying of Islamic monetary policy based on the productivity of the real sector and oriented to the welfare of society.

Causality Relationship between Central Bank Reforms and Inflation: Evidence from Developing Countries

This study provides evidence on the relationship between central bank reforms and inflation dynamics in a sample of 37 developing countries. We use panel structural break test and Granger non‐causality tests on annual inflation and the legal index of central bank independence (CBI), as a proxy of central bank reform, over 40 years period. The empirical results indicate a positive effect of central bank independence on inflation stabilization. Besides, we find that there exists bi-directional causality between central bank reforms and inflation. These findings suggest that central bank independence is beneficial in terms of sustained macroeconomic stabilization and should harness among developing countries. In particular, reforms should design to give central banks more autonomy in the conduct of monetary policy and financial sector regulation. JEL Classifications: E31, E58How to Cite:Anwar, C. J., & Nicholas, O. (2020). Causality Relationship Between Central Bank Reforms and Inflation: Evidence from Developing Countries. Signifikan: Jurnal Ilmu Ekonomi, Vol. 9(1), 15-30. doi: http://dx.doi.org/10.15408/sjie.v9i1.10955.

Slow Post-financial Crisis Recovery and Monetary Policy

Post-financial crisis recoveries tend to be slow and accompanied by slowdowns in total factor productivity (TFP) and permanent losses in GDP. To prevent them, how should monetary policy be conducted? We address this issue by developing a model with endogenous TFP growth in which an adverse financial shock can induce a slow recovery. In the model, a welfare-maximizing monetary policy rule features a strong response to output, and the welfare gain from output stabilization is much larger than when TFP expands exogenously. Moreover, inflation stabilization results in a sizable welfare loss, while nominal GDP stabilization works well, albeit causing high interest rate volatility. (JEL E12, E23, E32, E43, E44, E52, G01)

Approaching Modern Monetary Theory with a Taylor Rule

Considering the goals of Modern Monetary Theorists, this article examines inflation stabilization and employment maximization through a Taylor Rule for fiscal policy, similar to John Taylor’s foundational examination of the behavior of the Federal Reserve. If it is the role of the federal government to aid in the maintenance of the dual mandate of the Federal Reserve, then their behavior should follow a similar policy of setting an intermediate target of deficits relative to the maximum employment (the “Federal Job Guarantee”) and the inflation target. The paper will compare the historical data with the rule. When the predictions of the Deficit Rule are compared to historical data from 1965, we find that fiscal policy aligns with what the Deficit Rule predicts with two exceptions: the stagflation of the 1970s and the current increases in budget deficits.

Modeling Macroeconomic Policymakers’ Interactions under Zero Lower Bound Environment: The New Keynesian Theoretical Approach

The paper examines how the implicit coordination mechanisms between the policymakers could help in overcoming negative macroeconomic consequences which are provoked by the problem of zero lower bound (ZLB) on the nominal interest rates. For the long period of time, before the global recession started, the ZLB problem was not found to be interesting for researchers. Immediately after the crisis outbreak, more attention was put on that problem within different approaches since conventional monetary policy faced substantial limitation in overcoming business cycles. Many authors have proposed new unconventional measures in both monetary policy and fiscal policy sphere. The theoretical approaches to the ZLB problem include many different aspects. In the paper we chose to use regime switching models adjusted to simulate occasionally binding constraints in order to investigate different scenarios within the New Keynesian framework. We found that coordination between more passive monetary policymaker and more active fiscal policymaker is crucial in the ZLB environment. Central bank has to follow monetary policy rule in which both inflation stabilization and output stabilization have certain positive weight. However, credible policy-making which is supported by the relevant institutions is a necessary precondition for implicit coordination, which substantially decrease the losses occurred as a consequence of ZLB on interest rates.

Capital account regulation as part of the macroeconomic regime: comparing Brazil in the 1990s and 2000s

Capital account regulation (CAR) has experienced profound reconsideration since the global financial crisis. This new debate focuses on the macroeconomic gains of regulating international capital flows in terms of reducing external and financial vulnerability, but it does not consider relevant aspects relating to the context in which these regulations are implemented. In this paper, we undertake a comparative analysis of similar types of CAR applied in Brazil during the 1990s and 2000s. Based on this analysis, we conclude that for the design of CAR, which is relevant for its effectiveness, institutional features of both the financial market and the macroeconomic regime, shaped by macroeconomic constraints, are relevant. For the case of Brazil, we conclude that, contrary to the 2000s, the strong preference given to inflation stabilization in the 1990s, together with high external vulnerability, strongly limited the CAR's design of this period.