Achieving and Maintaining Price Stability in Nigeria

ByNicoletta Batini

June 1, 2004

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper reviews the historical performance of monetary policy in Nigeria and discusses the relative merits of alternative monetary policy strategies that Nigeria could adopt in the future, once the many operational issues that today obstruct the conduct of monetary policy have been addressed. An analysis of external and fiscal dominance in Nigeria reveals that none of the candidate strategies is particularly appealing although, on various grounds, a long-run target for inflation combined with a free float seems to be the ultimate option. The paper shows how to design and operationalize such a regime in Nigeria when account is taken for the emerging market features of the economy.

Subject: Emerging and frontier financial markets, Exchange rates, Inflation, Inflation targeting, Price stabilization

Keywords: central bank, inflation expectation, inflation target, managed float, output gap, price stability, volatility trade-off, WP

Pages:
39
Volume:
2004
DOI:
---
Issue:
097
Series:
Working Paper No. 2004/097
Stock No:
WPIEA0972004
ISBN:
9781451852059
ISSN:
1018-5941

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