•  
  •  
 

CBN Journal of Applied Statistics (JAS)

Keywords

Inflation, Growth, Threshold

Abstract

It is widely believed that price stability promote long-term economic growth, whereas high inflation is inimical to growth. This paper utilized a quarterly time series data for the period 1981 – 2009 to estimate a threshold level of inflation for Nigeria. Using a threshold regression model developed by Khan and Senhadji (2001), the study estimated a threshold inflation level of 13 per cent for Nigeria. Below the threshold level, inflation has a mild effect on economic activities, while above it, the magnitude of the negative effect of inflation on growth was high. The negative and significant relationship between inflation and economic growth for inflation rates both below and above the threshold level is robust with respect to changes in econometric methodology, additional explanatory variables and changes in data frequency. These finding are essential for monetary policy formulation as it provide a guide for the policy makers to choose an optimal target for inflation, which is consistent with long-term sustainable economic growth goals of the country.

Author Bio

The authors are staff of the Statistical Department, Central Bank of Nigeria

Publication Title

CBN Journal of Applied Statistics 2012

Issue

1

Volume

3

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.