Inflation Targeting Monetary Policy Rule in Nigeria: Estimates of the Policy Reaction Function

Abstract

Inflation Targeting Monetary Policy stance of Nigeria was examined using Taylor Policy Rule. The study used quarterly data from 2000:1 to 2010:4. Engle- Granger approach to co-integration was adopted and the results showed that implementation of monetary policy function was effectively done in order to achieve price stability in the economy that is characterized with persistent inflation for a very long time. The study therefore concluded that, monetary policy, in Nigeria context, needed to be supported by contractionary fiscal policy so as to be able to achieve the desired objectives.