Abstract
Taylor’s Rule is a monetary policy framework used by the Central bank to stabilize the pace of economic activities through interest rates mechanism. There are three key indicators to the rule. These include; Federal fund rate, Price level and changes in real income. Taylor’s Rule posits that the benchmark interest rate that drives economic stability and growth is determined by inflation and growth of national output. It was proposed by John Taylor in 1993 to US Federal Reserve Bank. This study investigated the applicability potential and suitability of the ‘Rule’ for monetary management in Nigeria by employing the Structural Vector Auto-Regression (SVAR). Empirical findings from the study established that growth of real National Output and Inflation do not have contemporaneous effects on Monetary Policy Rate (MPR) in Nigeria. It also indicates that shocks to growth of real National Output and inflation do not account for changes in MPR in Nigeria and vice-versa. Further findings from the study suggested that Taylor’s Rule to monetary policy framework may not be practically potent for monetary policy management in Nigeria. This study recommended that the Central bank of Nigeria should continue to explore and fine-tune Inflation Targeting as a monetary anchor; maintain optimum quantum of base money that would moderate the CPI and engender the growth of the economy; entrench policy consistency; and promote monetary and fiscal policy fusion in the Nigeria.
Keywords
Taylors’ Rule, Monetary Policy, SVAR
Citations
IRE Journals:
Hafsat Tijjani Mato
"Taylor’s Rule and Monetary Policy in Nigeria" Iconic Research And Engineering Journals Volume 9 Issue 2 2025 Page 1242-1250
IEEE:
Hafsat Tijjani Mato
"Taylor’s Rule and Monetary Policy in Nigeria" Iconic Research And Engineering Journals, 9(2)
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