Independence of monetary management and exchange rate regimes: evidence from Nigeria, 1961 – 1982: comments

Abstract

The following comments are based on Mr. Asogu's paper titled as above and which appeared in the December 1985 edition of the Economic and Financial Review. The objective of the study is" to use the monetary approach to the balance of payments (MABOP) and exchange rate theory of an open economy to determine the existence and significance of the links and relationships among macro-economic variables which are regularly applied in monetary management of both the domestic and external sectors".

The author hoped that through this procedure he could "provide a basis for rethinking about the adequacy or otherwise of current stance in monetary policy for the achievement of desired targets with minimal distortions on all the sectors". Although one objective thus appears to have been listed by the author, the various tests carried out in the body of the paper actually indicate that the author had several objectives which he intended to achieve. In particular, several equations were developed for the explanation of interest rates, exchange rates, reserves, and money demand in Nigeria. The reviewer concludes that the author failed to show the interactions among the equations which would convince the reader that only the objective stated in his introduction was being pursued.