Uncertainty of Output Gap and Monetary Policy-Making in Nigeria

• Main Authors: Abayomi T. Onanuga, Sheriffdeen A. Tella, Adenike M. Osoba
• Format: Article
• Language: English
• Published: Danubius University 2016-10-01
• Series: Acta Universitatis Danubius: Oeconomica
• Subjects: inflation rate; monetary policy rate; real output potential; generalized method of moments
• Online Access: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/3426/3604

This paper investigates the effect of output gap uncertainty on monetary policy rate in Nigeria-1991Q1-2014Q4. A major challenge of monetary policy is the attainment of sustainable output level but in setting the optimal monetary policy rate information about output gap and how uncertainty of the gap affects the path of the monetary policy rate is crucial for policy use. Empirical evidence on this phenomenon in Nigeria has been concerned with how monetary policy affects output while evidence on the response of monetary policy to uncertainty of real output is not indepth. Analythical approach in this paper adopts the Generalised Method of Moments econometric technique.