Monetary Policy, Sub-National Inflation Dynamics and Regional Spillovers in Nigeria
- 1 Department of Research, Financial Sector Division, Central Bank of Nigeria, Abuja, Nigeria
Abstract
This study evaluates the relationship between monetary policy shocks and sub-national inflation dynamics in Nigeria, using the SVAR framework. Furthermore, using the Diebold-Yilmaz (DY) methodology, it also examines the extent of inflation volatility spillovers among the regions. Results show that monetary policy shock generates a heterogeneous but insignificant influence on sub-national inflation in Nigeria. We also found substantial evidence of spillovers among the regions. The South-West, North-East and South-East regions were found as the only resilient regions and net transmitters of inflation volatility to other regions, while the South-South was the most vulnerable region, especially to shocks from the South-East. These findings suggest that an exogenous monetary policy shock is not sufficient to address sub-national inflation dynamics in Nigeria. Rather, a well-targeted policy may be required to address the challenge, including strengthening inter-regional network connectivity and addressing persistent insecurity challenges that have stamped its roots in the North-East and South-East regions.
DOI: https://doi.org/10.3844/jssp.2024.28.44
Copyright: © 2024 Chioma Peace Nwosu and Usenobong Friday Akpan. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
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Keywords
- Sub-National Inflation
- Monetary Policy
- Shocks
- Spillovers