Monetary policy measure as instruments of economic stabilization in nigeria

Thesis Overview

<p> </p><p><strong>1.0 INTRODUCTION<br>1.1 BACGROUND OF THE STUDY</strong></p><p>Generally monetary control measure include those devices that influence the overall supply, cost and availability of money and credit. This is the responsibility of the monetary authority which comprises the central bank and the federal government in Nigeria, the central bank exercises primary responsibilities for initiating, articulating, implementing and appraising such policies. The banks proposal are subject to ratification by the federal government.<br>Monetary policy measures are monetary management techniques put in place by the government through the central bank to control money stock that is supply of money in order to influence broad macro-economic objectives which include price stability high level of employment, sustainable economic growth and a balance of payment equilibrium. These broad objectives are achieved through the use of appropriate instruments, depending on which objective the policy formulated want to achieve and on the level of development of the economy.<br>In the application of monetary policy measures as instruments of stabilization of the economy, here these instruments are determined by the nature of the problems to be solved and by the environment in which these problems exist. There are broadly two categories of hese instrument viz, quantitative or indirect controls and selective (qualitative or direct) controls. Indirect instruments are usually used in market based economic where the quantity of money stock can be affected through the relationship between money supply and reserve money as well as the ability of the monetary authority to influence the creation of reserves. The reserves and hence, money supply can be affected through the following ways:<br>i. Change in reserves deposit ratio<br>ii. Change in discount rate<br>iii. Interest rate change and<br>iv. Engaging in open market operation (OMO)<br>In an under-developed financial environment, the instruments of monetary and credit targets at desired levels. The major direct control measures is direct interest regulation. Hence the regulatory authorities interpose explicit limitations on dealings between borrowers and creditors.<br>These instruments of monetary policy are applied in the achievement of various objectives However, all such objectives are in consonance with the broad objectives of the 1st National Rolling plan (1990-1992) which are:</p> <br><p></p>