Inflation and Economic Growth in Nigeria: Detecting the Threshold Level

Authors

Sani I. Doguwa, Central Bank of Nigeria, AbujaFollow

Keywords

threshold model, super-neutrality, inflation-growth nexus, inflation threshold points

Abstract

This paper re-examines the issue of the existence and the level of inflation threshold in the relationship between inflation and growth in Nigeria, using three different approaches that provide appropriate procedures for estimating the threshold level and inference. While Sarel’s (1996) approach provides a threshold point estimate of 9.9 per cent that was not well identified by the data, the technique of Khan and Senhadji (2001) identifies a 10.5 per cent inflation threshold as statistically significant to explain the inflation-growth nexus in Nigeria. Also, the approach of Drukker et al (2005) suggests a two threshold point model with 11.2 and 12.0 per cent as the appropriate inflation threshold points. These results suggest that the threshold level of inflation above which inflation is inimical to growth is estimated at 10.5 to 12 per cent for Nigeria. Using the estimated two threshold point model, this paper did not find enough reasons to accept the null hypothesis of the superneutrality of money, and therefore, suggest that there is a threshold level of inflation above which money is not super-neutral.

Author Bio

The author is a staff of the Statistics Department, Central Bank of Nigeria,

Publication Title

CBN Journal of Applied Statistics 2013

Issue

2

Volume

3

Recommended Citation

Doguwa, Sani I. (2012) "Inflation and Economic Growth in Nigeria: Detecting the Threshold Level," CBN Journal of Applied Statistics (JAS): Vol. 3: No. 2, Article 6.
Available at: https://dc.cbn.gov.ng/jas/vol3/iss2/6