INFLATION AND POVERTY REDUCTION HYPOTHESIS IN NIGERIA: A QUANTITATIVE EXAMINATION OF LONG-RUN STABILITY [1986 - 2022]
Abstract
This research investigated quantitatively, the impact of price stability (inflation)- a macroeconomic condition on poverty reduction in Nigeria for the period (1986 -2022), using a quantitative approach to examine the long-run stability. The main objective was to evaluate the impact of inflation on poverty reduction in Nigeria, through the maintenance of price stability. Basically, we investigated and analyzed the impact of macroeconomic condition of inflation on poverty reduction in Nigeria and established the level of stability of the variables over the period studied. For the achievement of these objectives, we put forward and specified models with variables such as, Interest rate (INTR), Money supply (MOS), Exchange Rate (EXRE) and poverty reduction proxied by gross domestic product per-capita (GDPPC). These variables were extracted from both the CBN and NBS statistical bulletin. The econometric methods of cointegration and error correction mechanism (ECM) and Chow Test of stability were applied to establish the extent of significant of the variables used by carrying out a Unit Root Non-stationary test based on Augmented Dickey Fuller Specification. Given the empirical results, it was established that some of the apriori expectations were inconsistent in the estimations. At the long-run, the results show to some extent that the level of impact of price stability on poverty reduction in Nigeria was high, appropriately signed and significant. This shows that GDPPC in Nigeria for the period under review does adjust fairly to changes in inflation, indicating the existence of long-run stability between them. To sum up therefore, based on our results, appropriate policy recommendations were made which include that, policy should be tailored towards reducing inflation, because it erodes the purchasing power of the individual and also reduce the level of the production of goods and services as a result of increase in cost.
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