IMPACT OF MACRO ECONOMIC FACTORS ON MONEY SUPPLY IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The interplay or relationship between various macroeconomic factors is the subject of a great deal of study in the field of macroeconomics. While macroeconomics deals with the economy as a whole, microeconomics is concerned with the study of individual agents such as consumers and businesses and their economic decision-making The factors in the external environment not subject to the control of a manager generally can be regarded as macro-economic factors or variables.
The corporate managers cannot control the macro economic variables but the government can control them through several policies. Thus, like all experts, the government in order to do a good job of managing the economy, will have to study, analyze and understand the major variables that affect or determine the current behavior of the macro-economy. Examples of the macro-economic variables that affect the economy and firms majorly include exchange rate, foreign direct investment, inflation rate, interest rate, money supply, etc. The management of these variables is usually done through fiscal and monetary policy by the government and her agencies e.g. the Central Bank.
Monetary policy is the regulation adopted by the central bank, which stabilizes the prices and maximizes production and employment of the country. Monetary policy is a regulation of a central bank which controls size and growth rate of the money supply. Monetary policy directly influences the interest rates which in turn has a negative relation with the price level. In the face of inflation the central bank of the country generally resorts to a rise in the cash reserve ratio, repo rate and reverse repo rate. The basic idea is to reduce the money supply in the economy. This would reduce aggregate demand. This reduction would again help reduce the price level. Monetary policy is adopted with an objective to make the most of production andemployment and consequently stabilize the price level of a country. Monetary policyalso regulates the interest rate, availability of credit and at the same time promotes theoverall economic growth of a country. The research intends to appraise the impact of macroeconomic factors on money supply in Nigeria.
1.2 STATEMENT OF THE PROBLEM
The problem confronting the research is to appraise the impact of macro-economic factor . It shall provide a detail analysis of the concept of macro-economic factor and money supply and elucidate the impact of various economic factor on money supply.
1.3 RESEARCH QUESTIONS
1 What constitute macro economic factors?
2 What is the nature of money supply?
3 What is the impact of macroeconomic factor on money supply in Nigeria?
1.4 OBJECTIVES OF THE STUDY
1 To provide a conceptual and theoretical appraisal of macroeconomic factors and money supply
2 To determine the impact of macroeconomic factors on money supply in Nigeria
1.5 SIGNIFICANCE OF THE STUDY
The study shall provide a detail analysis of macro-economic factors ,money supply and the impact of macro-economic factors on money supply in Nigeria It shall also serve as a veritable source of information on issues of macroeconomic Factors and money supply.
1.6 STATEMENT OF HYPOTHESIS
1 H0 Money supply is not significant to the economy of Nigeria
H1 Money supply is significant to the economy of Nigeria
2 H0 The level of money supply is low
H1 The level of money supply is high
3 H0 The impact of macro-economic factor on money supply is low
H1 The impact of macro-economic factor on money supply is high
1.7 SCOPE OF THE STUDY
The study focuses on the appraisal of the impact of macroeconomic factor on money supply in Nigeria
1.8 DEFINITION OF TERMS
MONETARY POLICY
Monetary policy is the regulation adopted by the central bank, which stabilizes the prices and maximizes production and employment of the country. Monetary policy is a regulation of a central bank which controls size and growth rate of the money supply. Monetary policy directly influences the interest rates which in turn has a negative relation with the price level. In the face of inflation the central bank of the country generally resorts to a rise in the cash reserve ratio, repo rate and reverse repo rate. The basic idea is to reduce the money supply in the economy. This would reduce aggregate demand. This reduction would again help reduce the price level.
MACRO ECONOMIC FACTOR
Macro-economic deals with the economy as a whole, microeconomics is concerned with the study of individual agents such as consumers and businesses and their economic decision-making The factors in the external environment not subject to the control of a manager generally can be regarded as macro-economic factors or variables.
The corporate managers cannot control the macro economic variables but the government can control them through several policies. Thus, like all experts, the government in order to do a good job of managing the economy, will have to study, analyze and understand the major variables that affect or determine the current behavior of the macro-economy. Examples of the macro-economic variables that affect the economy and firms majorly include exchange rate, foreign direct investment, inflation rate, interest rate, money supply, etc. The management of these variables is usually done through fiscal and monetary policy by the government and her agencies e.g. the Central Bank.