AN ASSESSMENT ON THE EFFECTIVENESS OF MONETARY POLICY ON ECONOMIC STABILIZATION (A CASE STUDY OF THE NIGERIAN ECONOMY)

ABSTRACT

The highly unsuitable economic conditions in Nigeria has been a major source of concern among economic and policy makers in recent time.  These economic problems can be attributed to the existence of market failure and the inability of the price mechanism to efficiently allocate scarce among economic agents.

This research sets out to examine the extent to which government intervention through monetary policy has been able to regulate the economy by ensuring general price stability and growth.

From the research work, we discover that monetary policy, through the use of the instrument of money supply but have not able to stabilize economic growth which as not been able to regulate the general price level.

This work also viewed the different schools of thought and their option about the use, effects and setbacks of monetary policy in stabilization of an economy, the Classical and the Cambridge model view money as a store of value and they believe that increase in money will cause same increase in prize, while the Keynesian argued that money is demanded for 3 purposes and concluded with their liquidity theory and lastly the monetarist they believed that demand is a stable function variable and money supply.

This work also focused on the means or mechanism through which this policy is been effected in the economy, the apex bank been the avenue through which the government extend this policy, the apex bank also through some means which include a direct and indirect mechanism extend this policy to the commercial banks and then to the general public.

This research work consist of a dependant variable in its hypothesis and some independent variable to explain the importance of monetary policy and its effect on the prize and Gross Domestic Product (GDP) in the economy, a least square regression method was adopted to derive the significant of the independent variable on the dependent variable.  A data covering the duration of 32 years was introduced in the model; the result was established, interpreted and concluded was drawn with recommendation.