Journal: Babcock Journal Of Management And Social Sciences
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Abstract
Inflation is a common phenomenon in developed as well as developing countries. It is a persistent and consistent increase in the general price level. In as much as inflation is a necessary catalyst for growth, it does have a limit beyond which it becomes unhealthy. Its unhealthiness can be measured in terms of its effect on output growth, welfare, and in the long run economic development. It is expected to have a negative significant relationship with output growth. Several studies including Barro (1996) confirm this. However, using data for 1971 – 2004, our regression estimate reveals a negative but insignificant relationship for the Nigerian situation. It is therefore suggested that monetary transmission mechanism especially focus on interest rate channels.