This goal of this study is to assess the effect of inflation on industrial output in Nigeria using annual data from 1982 to 2015. The error correction model (ECM) was employed to estimate the short-run and long-run dynamics, while the Engel and Granger...
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This goal of this study is to assess the effect of inflation on industrial output in Nigeria using annual data from 1982 to 2015. The error correction model (ECM) was employed to estimate the short-run and long-run dynamics, while the Engel and Granger residual-based technique for cointegration was employed to test for long-run relationship. The Findings revealed that inflation, official exchange rate and real interest rate had negative effects on Nigeria’s industrial output. A unit change in inflation rate and real interest rates brought about 9.2% and 3.3% decline in industrial output respectively. When however the broad money supply increased by 1%, industrial sector value added increased by 23.7%. Growth in broad money supply was however found to have significant positive effect on industrial production over the period. Based on the ECM, the study found that the last period’s deviation from long-run equilibrium is corrected at the speed of 62.7% annually.
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