An Empirical Analysis of Price Stability Effect of Nigerian Monetary Policy (1981- 2012)

The study examines the price stability effect of Nigerian monetary policy from I98I to 2012. The Error Correction Mechanism (ECM) model was employed after conducting a number of diagnosis test and ensured that the data were stable. The results of the analysis showed that monetary policy implementation has not yielded the expected outcome to ensure price stability. Also, Inflation, Monetary Policy Rate and Interest Rate are significant determinants of price instability while Money Supply and Exchange Rate cause price instability, though not significantly. The findings revealed that general price level increases as the exogenous variables increase. Therefore, restricted monetary policies should be put in place so as to reduce inflation rate to the barest minimum and the interest rate policies should be implemented in a way that will strengthen the purchasing power of the Naira