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ABSTRACT
The study examined the efficacy of monetary and fiscal policy on price stability in Nigeria, using time series data spanning from 1996 to 2021. The specific objectives were to: examine the impact of interest rate in achieving price stability in Nigeria; determine the impact of money supply in achieving price stability in Nigeria; ascertain the impact of government expenditure on price stability in Nigeria and; determine the impact of taxation on price stability in Nigeria. Relevant conceptual, empirical and theoretical literatures were reviewed. The study employed the error correction model (ECM) technique to estimate the efficacy of monetary and fiscal policy on price stability in Nigeria. The statistical tools employed in analyzing the data include descriptive statistics, Augmented Dickey Fuller unit root test and Engle and Granger Cointegration test. The result of the descriptive statistics indicates that all the variables were normally distributed. Augmented Dickey Fuller (ADF) test statistics showed that all the variables used in this study were stationary at first difference. Engle Granger Cointegration test indicate that there is a long run relationship between the variables used in the study. The dependent chosen is inflation as a proxy for price stability, while the procies for monetary policy were money supply and interest rates and the proxies for fiscal policy were government expenditures and taxation. The study therefore concluded that the overall variables were statistically significant in explaining variations in Inflation rate and also government expenditures was found to be statistically significant in explaining variations in Inflation rate in Nigeria within the period examined. The study recommended among others, that the strengthening of monetary policy tools and also fiscal policy tools in maintaining price stability.
