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Achieving and Maintaining Relative Domestic Price Stability in an Emerging Economy

Otutu Chidiebere Hilary, PhD

Abstract

This paper investigates on the long-run means of achieving and maintaining relative domestic price stability in an emerging economy (Nigeria). Simply, it looked at long-run solutions for achieving and maintaining price stability in Nigeria. In the light of this objective, a stable price and free float regime is the best option for Nigeria in the long-run. Thus, the inflation targeting regime announced to a full-fledged monetary policy is preferably opt for in the long-run. More so, the institutional commitment to price stability is defined by a long-run numerical target between 1% and 4% in line with other emerging market economies that target inflation. More so, in analyzing the theories on price stability, it seems that there is no conflict between price stability and any other macroeconomic objectives hence, in an emerging economy, more than one objective can be achieved at the same time. Finally, this paper showcased a simple plan such like Taylor’s Rule that could provide a good benchmark for the monetary policy instrument while pursuing the inflation target, although the rule would need to be modified to suit the emerging market characteristics of Nigeria.

Keywords

Domestic Price (Inflation)Consumer Price Index (CPI)Taylor’s RuleNumerical

References

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