INFLATION AND STANDARD OF LIVING IN NIGERIA
DOI:
https://doi.org/10.47941/ijdcs.812Keywords:
Inflation Rates, Living StandardsAbstract
Purpose: Standard of living is very germane to every economy. It gives a broad view of how the economy is fairing on a global scale. If an individual cannot get required basic necessities due to low purchasing power, his/her marginal propensity to consume (MPC) rises which makes it more difficult for the individual to live comfortably hence the standard of living dips. Several researches have been carried out but the standard of living still remains abysmally low. From empirical review, we find that several countries in sub-Sahara Africa, Nigeria inclusive suffers from low standard of living. The case of Nigeria being evidently severe as Nigeria has over 91 million people living in abject poverty.
Methodology: Time series data on inflation rate and standard of living proxied by the Human Development Index (HDI) between 1998 and 2017 was used for this research. Augmented Dickey Fuller and Phillip-Perron unit root tests were used to test for stationarity of the data. Based on findings, the Auto Regressive Distributed Lagged (ARDL) model was adopted for inferential analyses. Descriptive statistics employed include skewness, kurtosis, Jarque-Bera test and BreuchPagan-Godfrey serial correlation LM test, Breuch-Pagan test for heteroscedasticity and the Durbin-Watson test.
Results: Results indicated that there exists a long-run relationship between inflation and standard of living. Inflation exhibited a negative and significant effect with a coefficient of -0.034 against a P-value of 0.017 which implied that a unit increase in inflation brings about 0.034unit decrease in standard of living over the period of study.
Contributions to Theory, Policy and Practice: Based on the findings we recommend that a proper blend of fiscal and monetary policies should be deployed to improve the standard of living of Nigerians.
Downloads
References
Alam, S., Mohluddin, G. and Arif, I. (2014), “Crude quantity theory of money: A case of Bangladesh economy”, American journal economics, 4(3), 137-143.
Amin, S. B. (2011). “Quantity theory of money and its applicability: the case of Bangladesh”, World Review of Business Research, 1(4), 33-43.
Asekunowo, V. O. (2016), “The causes of persistent inflation in Nigeria”, CBN Journal of Applied Statistics, 7(2), 49-57.
Bawa, S., Abdullahi, I. S. and Ibrahim, A. (2016). Analysis of Inflation Dynamics in Nigeria. CBN Journal of Applied Statistics, 7(1), 255 –276.
Brewer, M. O’dea, C., Paul, G. and Sibieta, L. (2009), “The living standards of families with children reporting low incomes”, International journal of economies and social sciences, 7(12), 78-90.
Burke, M. A. and Ozdagli, A. (2013), “Household inflation expectations and consumer spending; Evidence from panel data”, Federal reserve bank of Boston, 12(1), 13-25.
Buiter, W. H. "The Fiscal Theory of The Price Level: A Critique," Economic Journal, 2002, 11(2), 459-480.
Chand, S. (2013). Major Effects of Inflation. yourarticlelibrary.com:
www.yourarticlelibrary.com/macro-economics/inflation-macro...inflation.../31091 Retrieved On 8th of November, 2018 at 5:40pm.
Chimobi, O. P. (2010), “Inflation and Economic Growth in Nigeria,” Journal of Sustainable Development, 3(2), 67-81.
Cochrane, J. H. (2001), “Long term debt and optimal policy in the fiscal theory of the price level” Econometrica, 91(5), 21-38.
Dimand, R. W. (2000), “Irving Fisher and the quantity theory of money: The last Phase.”, Journal of the history of economic thought, 22(3), 329-348.
Doguwa, S. I. (2016), “Inflation and economic growth in Nigeria: detecting the threshold level” CBN journal of applied statistics, 3(2), 99-124.
Farid, S., Khan, W. A., Warriach, I. A., and Warriach, A. (2012), “Effects of inflation on standard of living (A case study of Multan, Pakistan)”, Universal journal of management and social sciences. 2(12), 1-6.
Gagarawa, M. A. and Mehrotra, V. (2017), “Impact of inflation on living standard of public primary school teachers in Gagarawa local government area, Jigawa state-Nigeria”, International journal of management and social sciences, 3(1), 11-26.
Gordon, D. B., and Leeper, E. M. (2002), “The price level, the quantity theory of money, and the fiscal theory of the price level (No. 9084),” National Bureau of Economic Research. Haq, Z. U., Nazli, H. and Meilke, K. (2008), “Implications of high food prices for poverty in Pakistan”, Agricultural Economics, 39(9), 477-484.
Horwitz, S. (2003),” The costs of inflation revisited”. The review of Austrian economics, 16(1), 7795.
Howden, D. (2013). “The quantity theory of money”, mpra.ub.uni.muenchen.de: https://mpra.ub.uni muenchen.de/79601/1/MPRA_paper_79601.pd Retrieved On 3rd of December 2018 at 3:00pm.
Humphrey, M. T. (2010), “Empirical tests of the quantity theory of money in the United States, 1900-1930” History of political economy, 8(1), 14-24
Jacobs, D. P., Perera, D. & William, O. (2014),” Inflation and cost of living. Reserve bank of Australia” https://www.rba.gov.au/publications/bulletin/2014/mar/pdf/bu-0314-4.pdf Retrieved on 21st of November, 2018 at 11:13am.
Koch, S. F. and Bosch, A. (2009). “Inflation and the household. Towards a measurement of the welfare costs of inflation. Pretoria: South African Central Bank”, International journal of management and finance, 7(4), 11-31.
Mbongo, E. J., Mutasa, F. and Msigwa, R. E. (2014),” The effect of money supply on inflation in Tanzania”, International journal of economics, 3(2), 1926.
Mwanzia, B. M. (2014), “Impact of inflation on living standards among underclass single mothers: case study of Soweto slumin Githurai 44”, Journal of management sciences, 6(3), 45-61.
Sands, P. (2016), “Making it Harder for the Bad Guys: The case for Eliminating High Denomination Notes”, Journal econometrica, 4(3), 23-39.
Slyan, P. A., Adegoriola, O. O. and Adolphus, N. (2016). “Unemployment and inflation: Implication on poverty level in Nigeria”, International journal of commerce, 4(1), 2337.
Sargent, T. J. and Wallace, A. (1975), “Princeton Economic History”, https://press.princeton.ed /titles/7306.html Retrieved On 6th of September 2018 at 8:09am.
Shahor, T. (2011). “Hyper Inflation and Market Power in Agriculture: A case study of the Banana Industry in Isreal”, International Journal of Economic Research, 2(3), 136-147.
Tolcha, T. D. (2015),” The Impact Of Inflation On Living Standard of Households In Hawassa City, Ethiopia”, researchgate.net: https://www.researchgate.net/.../323365856. _THE_IMPAC _OF_INFLATION_ON_LIV ... Retrieved on 11th December 2018 at 5:56am.
Woodford, M. (1990),” The Optimum Quantity of Money”, in Benjamin M. Friedman and Frank
H. Hahn. Eds Handbook of Monetary Economics, 2, 1067-52
Zidek, L. and Chirbik, M. (2015). “Impact of currency redenomination on inflation: case study of Turkey”, Asian Economic and Financial Review, 5(1), 23-30.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Ogbebor Peter I , Oguntodu James A , Oyinloye Paul O
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
