Effectiveness Of Monetary Policy And Output Effects In light Of The Internalization Of money Supply - The Nigerian Economy As a Model

Abstract

Abstract

This research aims to determine the effects of the internal nature of the money supply variable on the effectiveness of monetary policy, since the fact that the money supply is an internal variable requires the monetary authorities to avoid the failure of monetary policy management by targeting the monetary aggregates, and adopting the short-term interest rate tool and the exchange rate as important tools for managing monetary policy. The research also aims to limit the overall effects of the relationship between internal changes in the money supply and changes in the main macroeconomic variables (especially output) on managing monetary policy and overall economic activity, stimulating economic growth and ensuring the achievement of economic stability policies, in a manner that shows the real role of the internal theory of money supply in total economy. The results that have been reached lead to accepting the research hypothesis, because the effect of the internal money supply is not limited to creating an incentive for investment, and making aggregate demand a major factor for creating production only, but rather its effects avoiding the harmful effects of lower prices resulting from the growth of productivity assuming the stability of demand. The effect of income (GDP) on the money supply is much greater than the effect of money supply on income. This means that economic activity has the greatest impact on determining the internalization of the money supply in the Nigerian economy, even though monetary policy measures, through the short-term interest rate, affect to a certain degree in determining the money supply, which makes the variable GDP the basis of Nigeria's money supply.