Impact of Monetary Policy on Inflation Rate in Nigeria: Vector Autoregressive Analysis

The Nigerian monetary authorities have implemented several monetary management policies with the aim of achieving price stability and economic growth in the country, but without success. This study was conducted to examine the impact of monetary policy management on inflation in Nigeria during the 1985- 2019. Autoregressive distributed lag analysis was employed on time series data covering the period. It was found that while monetary policy rate and foreign exchange rate impacted negatively on inflation; broad money supply impact positively on it. Therefore, the study recommended that monetary authorities should fix the exchange rate at where the value of naira will rise. Besides, government should direct more investment on productive activities in other to increase output of goods and services in the country. This will lead to a fall in inflation rate and hence economic growth in the country.