Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria

Nathaniel E. Urama; Moses O. Oduh; Emmanuel O. Nwosu; Augustine C. Odo

Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria

Year 2013, Volume: 3 Issue: 2, 525 - 536, 01.06.2013

Nathaniel E. Urama Moses O. Oduh Emmanuel O. Nwosu Augustine C. Odo

Abstract

In an attempt to find out the degree of monetary non-neutrality in Nigeria we started from finding out the size of price rigidity in the country. Computation with Ball and Romer method showed that price rigidity is optimal decision for firms in Nigeria only when the menu cost is well above 2.28% of the firm’s revenue which is on the high side, showing the likelihood of weak price rigidity in the country. Confirming this, the IRFs of the SVAR shows that the response of inflation to nominal shock has only one period lag. These combined results led to a small though persistent response of output to the nominal shock. The result of the study therefore points towards large nominal and small real effect of monetary policy in Nigeria and conclude that monetary policy will be a better option for contractionary plan but not for an expansionary plan.

Keywords

Price rigidity, menu cost, monetary non-neutrality, monetary policy

Year 2013, Volume: 3 Issue: 2, 525 - 536, 01.06.2013

Nathaniel E. Urama Moses O. Oduh Emmanuel O. Nwosu Augustine C. Odo

Abstract

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Details

Other ID	JA57CD49DT
Journal Section	Research Article
Authors	Nathaniel E. Urama This is me Moses O. Oduh This is me Emmanuel O. Nwosu This is me Augustine C. Odo This is me
Publication Date	June 1, 2013
Published in Issue	Year 2013 Volume: 3 Issue: 2

Cite

APA	Urama, N. E., Oduh, M. O., Nwosu, E. O., Odo, A. C. (2013). Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria. International Journal of Economics and Financial Issues, 3(2), 525-536.
AMA	Urama NE, Oduh MO, Nwosu EO, Odo AC. Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria. IJEFI. June 2013;3(2):525-536.
Chicago	Urama, Nathaniel E., Moses O. Oduh, Emmanuel O. Nwosu, and Augustine C. Odo. “Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria”. International Journal of Economics and Financial Issues 3, no. 2 (June 2013): 525-36.
EndNote	Urama NE, Oduh MO, Nwosu EO, Odo AC (June 1, 2013) Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria. International Journal of Economics and Financial Issues 3 2 525–536.
IEEE	N. E. Urama, M. O. Oduh, E. O. Nwosu, and A. C. Odo, “Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria”, IJEFI, vol. 3, no. 2, pp. 525–536, 2013.
ISNAD	Urama, Nathaniel E. et al. “Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria”. International Journal of Economics and Financial Issues 3/2 (June 2013), 525-536.
JAMA	Urama NE, Oduh MO, Nwosu EO, Odo AC. Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria. IJEFI. 2013;3:525–536.
MLA	Urama, Nathaniel E. et al. “Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria”. International Journal of Economics and Financial Issues, vol. 3, no. 2, 2013, pp. 525-36.
Vancouver	Urama NE, Oduh MO, Nwosu EO, Odo AC. Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria. IJEFI. 2013;3(2):525-36.