Inflation, Savings and Output in Nigeria: A Var Approach

Transcription

1 Journal of Emerging Trends in Economics and Managemen Sciences (JETEMS) 3(5): Scholarlink Research Insiue Journals, 2012 (ISSN: ) jeems.scholarlinkresearch.org Journal of Emerging Trends in Economics and Managemen Sciences (JETEMS) 3(5): (ISSN: ) Inflaion, Savings and Oupu in Nigeria: A Var Approach 1 Samuel Igbaayo and 2 Andrew O. Agbada 1 Economics Deparmen, College of Social and Managemen Sciences, Afe Babalola Universiy Ado-Ekii (ABUAD), Ekii Sae, Nigeria 2 Banking and Finance Deparmens, College of Social and Managemen Sciences, Afe Babalola Universiy Ado-Ekii (ABUAD), Ekii Sae, Nigeria Corresponding Auhor: Samuel Igbaayo Absrac This sudy invesigaes he relaionship beween Inflaion, Savings and Oupu in Nigeria, employing Vecor Auoregression (VAR) approach. VAR is an acive sysems of models in which he curren level of each endogenous variable in he sysem depends on pas movemens of all variables and i deermines how much influence each of he endogenous variable have on each oher. Ordinary Leas Square and Granger causaliy ess were also conduced along side VAR o augmen findings and show robusness of resuls. Using Timeseries daa for 1970 o 2010 sourced from Cenral Bank of Nigeria (CBN) Saisical bulleins for 2007 and 2010 and Annual repor for 2010, we esimaed VAR models o deermine he iner-relaionship beween he endogenous variables. Generally, he empirical resuls were impressive. The OLS resul indicaes ha over 90 percen of he variaions in Oupu for he esimaion period were capured by he explanaory variables. Each of he individual coefficiens of he explanaory variables also show he expeced a priori signs suggesing ha while Inflaion ends o reduce Oupu, Savings acually simulaes Oupu. Essenially, he Granger causaliy es shows ha changes in Inflaion may no have simulaed nor sufficienly responded o Oupu growh or Savings in Nigeria over he period of analysis. On he oher hand, changes in Savings effecively simulae Oupu and Oupu also criically cause movemens in Savings in Nigeria. The VAR resuls affirmed ha Oupu changes respond more criically o Savings changes han Inflaion changes, suggesing ha boosing privae Savings will effecively simulae Oupu in he Nigerian economy. The empirical evidence obained in he sudy may have provided some useful hins on he behaviours or cause-effec relaionship beween Inflaion, privae Savings and Oupu (GDP) in he Nigerian economy. Inferences drawn have implicaions for all sakeholders in he economy and are paricularly useful o moneary auhoriies and regulaors, praciioners and marke-players. Keywords: inflaion, savings, oupu, Nigeria, vecor auoregression (VAR). INTRODUCTION One of he fundamenal macroeconomic variables found in every naion s economy, hough a differen levels or degrees, is Inflaion. Inflaion is defined as he coninuous and susained rise in general price level of goods and services in a naion s economy. I refers o a siuaion where he volume of money chasing he available goods and services in an economy is oo much, consequenly resuling in a persisen rise in general price level. From heoreical lieraures, i is a generally acceped phenomenon ha high Inflaion in an economy has dire consequences and paricularly on he sabiliy of prices of goods and services. Unless here is a corresponding rise in income level, Savings, he major source of capial accumulaion of households and enrepreneurs will be seriously depleed. For his reason, sakeholders in he economy which include regulaory agencies and policy makers are concerned abou he coss and consequences of high inflaion. Gokal and Hanif (2004) argued ha Inflaion may also reduce a counry s inernaional compeiveness by making is expors relaively more expensive, hus impacing on he balance of paymens. From he oil boom era of 1970s in Nigeria, persisen inflaionary pressures have exered overwhelming effecs in he economy and various measures ranging from price conrol, wage freezes o implemenaion of moneary and fiscal policies have been employed by moneary auhoriies o ackle inflaion. Orubu, (2009) posis ha since he lae 1990s, he Cenral Bank of Nigeria (CBN) has focused more on moneary policy o comba Inflaion in Nigeria. Succincly, Savings may be defined as afer ax income no spen. I may righly be referred o or presumed deferred consumpion, being income lef over for fuure consumpion on capial invesmen or for precauionary and speculaive moives. Concisely, Savings is summed as disposable income less 447

2 consumpion. In developing counries and Nigeria in paricular, privae Savings consiues he main source of capial accumulaion for invesmen purposes. From heoreical lieraures, oal Savings of households, enrepreneurs and corporae eniies in an economy has posiive correlaion wih Oupu. Amongs oher hings, Savings serve as he main source of financing invesmen and relaed economic aciviies. According o Krieckhaus (2002), a higher level of naional Savings leads o higher invesmen and consequenly higher Oupu. This is so because he level of Savings deermines he magniude of capial accumulaion. On he oher hand, he magniude of oal earnings depends on he level of oal Oupu, hus Oupu also deermines he level of Savings (capial accumulaion) and invesmens by households and enrepreneurs. This means ha a change in he level of Savings will sysemaically cause a change in capial accumulaion (capial sock) and consequenly a change in Oupu. Oupu is he oal value of all goods and services produced in a counry a a given period of ime. Blanchard (2011), opined ha Oupu can be measured as oal income, or i can be viewed from he producive side and measured as he oal value of final goods and services or he sum of all value added in he economy. As a macroeconomic concep, Oupu is measured by Gross Domesic Produc (GDP). STATEMENT OF THE PROBLEM From he foregoing, here seems o exis some sor of ineracions beween Inflaion, Saving and Oupu in every economy and in Nigeria, he focal poin in his sudy. Thus, he sudy seeks o explore he inerrelaionship beween Inflaion, Savings and Oupu in Nigeria using a Vecor Auoregression (VAR) approach. I aims a using he movemen of he endogenous variables wihin he VAR sysem o deermine heir relaionship as compared o heoreical conceps. LIMITATION OF STUDY The sudy of his naure has implicaions for global economy because in he economy of every counry of he world, here are inerplay of macroeconomics aggregaes such as Inflaion, Savings and Oupu a differen levels or degrees. However, his sudy is limied o he Nigerian economy as daa employed in our VAR esimaions sourced from he Saisical Bullein and Annual Repor of he Cenral Bank of Nigeria (CBN) relae specifically o he economy of Nigeria alone. LITERATURE REVIEW Globally, Inflaion is one of he mos fundamenal macroeconomic variables ha ranscend he economies of boh he developed and developing counries of he world. Owing o is consequences, i is a concep ha aracs he aenion of sakeholders in an economy and regulaory auhoriies in paricular. In order o sabilize he prices of goods and services, encourage privae Savings aimed a boosing invesmens in an aemp o improve Oupu, moneary auhoriies usually find hemselves adoping inflaion argeing policies. Using 2010 as benchmark o survey rends in he global markes, Cenral Bank of Nigeria Annual Repor for 2010 (CBNAR, (2010) posis ha consumer prices rose generally especially for food and oil prices. According o he repor, in advanced economies such as ha of he Unied Sae, Japan, UK e ceera, inflaion averaged 1.1 percen compared wih 0.7 percen in 2009 and in Euro areas, i averaged 1.6 percen agains 0.3 percen in Counries in he Wesern Hemisphere such as Venezuela, Argenina e ceera had an average inflaion rae of 6.8 percen agains 5.0 percen and in he emerging marke economies and developing counries, inflaion rose by one percen o 6.2 percen relaive o rae in However, he repor affirmed ha he economies of developing Asia enjoyed a srong rebound of 8.2 percen in 2010 due o significan growh in rade driven by he large manufacuring secor. From heoreical lieraures, one of he primary goals of inflaion argeing policies in an economy is o ulimaely improve a counry s inernaional compeiiveness in erms of Oupu (Gross Domesic Produc (GDP)) growh. On global Oupu CBNAR, (2010) conends ha global oupu which conraced in 2009 resumed growh in 2010, alhough wih uncerainies abou is susainabiliy in he world bigges markes, namely, he Unied Sae, Europe and China. This rend from he view of CBN is due o higher performance in many emerging economies, srong domesic demand in developing counries as well as he combined effecs of fiscal and moneary inervenions adoped in he advanced economies. An oulook of global changes in world Oupu and prices for he period 2006 o 2010 is shown in able 1. There is a consensus in heoreical lieraures ha moderae inflaion could reasonably impac posiively on an economy generally. Orubu (2009) argued ha moderae inflaion can increase he level of invesmens leading o a faser overall growh in he economy. This consensus reasoning emanaes from he fac ha inflaion, moderae or no, ends o lower he value of reurns on moneary asses, paricularly cash asses ha saisfied he M1 definiion of money and his explains he preference of invesors shifing heir invesmen o real capial projecs raher han holding heir asses in cash suscepible o inflaion. Of cause, his refers o he concep of Tobin s effec which according o Gokal and Hanif (2004) suggess ha inflaion causes individuals and enrepreneurs o subsiue ou money ino ineres earning asses. 448

3 Table 1: Changes in World Oupu and Prices (Percen) 2006 o OUTPUT CONSUMER PRICES Region/Counries Advanced Economies Unied Saes Japan European Union Germany France Ialy Unied Kingdom Euro Area Oher Advanced Economies New indusrialized Asian Economies Oher emerging Markes & Developing Counries Regional Groups Cenral & Easern Europe Russia Africa Asia Middle Eas Wesern Hemispheres China Source: CBN Annual Repor 2010 P46, (Culled from World Economic Oulook, January.2011). The fac of he argumen is ha viable invesmens in capial projecs or ineres earning asses moivae and inensify greaer capial appropriaions, leading o increase in Oupu and an enhanced growh in he economy. In his sense, consensus exiss in economic heories ha moderae inflaion exhibis a posiive iner-relaionship o oupu growh and hence economic growh. However, consensus also exis in heoreical lieraures ha he economic rends wih high inflaion are differen. High inflaion resuling from rising and unsable prices exers pressure on he economy and his could reasonably and effecively affec he overall propensiy of households and enrepreneurs o save. In effec, high inflaion does impac negaively on capial accumulaion and consequenly on invesmens. I is obvious ha high inflaion lowers real wages and he value of reurns on invesmen, paricularly where nominal wages remain consan. I also leads o uncerainy in fuure earnings from invesmen and producion. High inflaion erodes he purchasing power of money balance and depreciaes in value capial for invesmen hus compelling invesors, enrepreneurs and households o reduce heir economic aciviies and consequenly, he level of oupu falls. The argumen agains high inflaion appeared conroversial as some heoreical lieraures express he view ha high inflaion rae may grow simulaneously wih Oupu (Gross Domesic Producs), hough, his lies criically on condiion ha more goods and services are acually produced and exchanged in he economy, raher han increasing prices for he same goods and services. While his view may hold rue for demand-push inflaion, Larry, (2006) conends ha in cos-push inflaion ha view does no hold rue because cos-push inflaion may have been iniiaed (impored) by an exernal shock. For example, a rise in oil prices in inernaional marke may lead o general price increase in he prices of all goods ha use oil as raw maerial, hus increasing he cos of producion. I could herefore be inferred ha high inflaion reduces a naion s inernaional compeiiveness by making is goods relaively more expensive han hose of oher naions. Obviously, an increase in inflaion rae may lead o an increase in he nominal value (he amoun reflecing producion quaniies and prices) of Oupu bu may or may no cause a rise in real Oupu (he amoun in differen years reflecing only changes in quaniies). Again, he view of some economic scholars is ha he relaionship beween Inflaion and Oupu may no be oo direc. Shoaib (2006) posis ha he rae of Inflaion has a bearing on he marke rae of ineres. I is argued ha a higher rae of Inflaion forces Cenral Banks o raise ineres raes and his increases he cos of credi for economic unis generally and for he manufacuring indusry in paricular; resulanly, heir margins are squeezed. Assuming he Inflaion is cos-push, in he absence of adequae demand, invesors and producers may end up lowering heir invesmens and producion respecively. Empirical sudies on he relaionship beween inflaion and savings have also re-affirmed ha high Inflaion impacs on privae Savings negaively, ha inflaion is negaively correlaed o he real value of household s ne-worh. Fama (1981) revealed ha he real naional income (Oupu) and Inflaion are 449

4 negaively correlaed. In his working paper No a Whie Cener for Financial Research, The Universiy of Pennsylvia, USA, Friend conends ha a more plausible argumen migh be ha high inflaion faciliaes he ransfer of resources from he privae secor which has a higher propensiy o save o he governmen secor because Inflaion makes i easier for governmen o increase effecive ax rae and hus served o depress over-all Savings/Income raio. Based on heoreical and empirical sudies, i may be concluded ha he impac of Inflaion on Oupu depends on he magniude of Inflaion (moderae or high) and on he ype of inflaion (cospush or demand-push) in he marke place. The relaionship beween domesic Savings and Oupu is explained from he perspecive ha Savings is he primary source of capial accumulaion paricularly for households and enrepreneurs whose roles in an economy canno be over-emphasized. The so-called economic break-hrough of Japan referred o as Japanese miracle emanaes from he microaciviies of households and enrepreneurs. We deduce from heoreical lieraures, ha he higher he level of Savings, he higher he level of invesmens and so he higher he Oupu. Jappelli and Pagano (1994) conduced an empirical esimaion using ordinary Leas Square (OLS) on some daa and summed up ha a higher savings rae o GDP leads o economic growh, evidencing he fac ha Savings is posiively correlaed o Oupu. On he oher hand, Quijano and Quijano (2003) opined ha he amoun of capial deermines he amoun of Oupu being produced; and in like manner, he amoun of Oupu deermines he amoun of Savings and invesmens and so he amoun of capial accumulaed. Presenly, Savings and Invesmens have become prime macroeconomic variables paricularly in emerging markes. The domesic Savings rae is a vial indicaor or parameer of economic developmen as here is a posiive correlaion beween domesic Savings rae and Invesmen raes. Boh Savings and Invesmen raes are deermining facors in he capaciy of banks o lend o boos Oupu levels in he economy. METHODOLOGY Variables, Daa and Analyical Tool Overimes, he Nigerian economic sysem or economy o be precise, has winessed several policy regimes under boh miliary and democraic governance. The sudy seeks o invesigae he inerrelaionship beween macro economic variables such as Inflaion raes, he measure of inflaionary rends in he economy, Toal privae Savings, he basic source of capial accumulaion for invesmens and economic aciviies and Oupu measured as Gross Domesic Produc (GDP) for he period 1970 o 2010 using he VAR approach. Thus, he variables used for our esimaions include: Inflaion Rae expressed in percenages, Toal Savings and Oupu (GDP) for he said period of fory years under review. The empirical esimaion aemps o capure he srucural and dynamic ineracions of hese economic variables. The daa are secondary daa sourced from he official publicaions and repors of he Cenral Bank of Nigeria (CBN) namely, 2007 and 2010 Saisical Bullein and 2010 Annual repor. The daa are annual daa covering he period 1970 o 2010 for all variables used for he empirical esimaion. The primary analyical ool used for he esimaion is Vecor Auoregression (VAR) model which is believed o be he mos successful, conciliaory and easy o use model for mulivariae ime series analysis. Oher models employed in his sudy o show he robusness of he resuls and findings include he Ordinary Leas Square (OLS) model and he Granger Causaliy (GC) es. In our empirical analysis however, we begin wih OLS resuls, followed by Granger causaliy es before proceeding o he VAR model in order o provide a rich paern o he empirical invesigaion. The VAR Model Specificaion Again, he primary analyical ool used for his sudy is Vecor Auoregression (VAR) model. Basically, i is a dynamic sysem of equaions ha examine he impac of shocks or ineracions beween economic variables. VAR provides adequae saisical represenaions of he impac of shocks or pas ineracions beween economic variables. In oher erms, how changes in Inflaion raes impac on Savings and Oupu. Usually, VAR are used for forecasing and for invesigaing he effec of shocks on a sysem of economic variables, paricularly where he endogenous variables wihin he VAR sysem are viewed as reflecing he effec of exogenous shocks. Generally, he VAR model is represened by he following equaion. Y A Y A Y... A Y p p (1) Where: Y = Vecor of endogenous variables a ime A = (n x n) coefficien marices i ( i 1,2,..., p) describing he relaionships among he endogenous and exogenous variables = Vecor of residuals or random disurbances which represen he unexpeced movemens in he variable. The above equaion (1) may be re-wrien in a more compac form using he lag operaor (L) as proposed by Sims (1980) as follows. Y A( L) (2) Y 1 represens he marix of coefficiens o be esimaed. According o he Economic Models a he Bank of England, he VAR approach views 450

5 movemens in he endogenous variables as fundamenally reflecing he effec of exogenous shocks hiing he economy. We deduce he model for his sudy from he above equaions incorporaing Oupu (rgdp ), Inflaion (I ) and Savings (S ) o capure he dynamic ineracions beween he variables. This is represened as follows: A i rgdp ; I ; S (3) In marix form, he above equaion may be represened as follows: The Granger Causaliy Resul In he Granger Causaliy es, we observed he direcion of cause-effec relaionship among he variables in he analysis by considering he F- saisics in he resul. This provides he basis for deermining which variable provide he lead for responses by oher variables. The Granger causaliy es resuls are presened in he able below. A significan F-saisic value implies ha he saed null hypohesis is o be rejeced and he alernaive acceped. = + Where: are he srucural disurbances on oupu (real Gross Domesic Produc). EMPIRICAL ANALYSIS Three analyses are conduced including he OLS esimaion, Granger Causaliy es and he VAR resuls. Ordinary Leas Square (OLS) Resuls The resuls of he OLS esimaion are quie impressive. The coefficien of deerminaion is high a This indicaes ha over 90 percen of he variaions in oupu for he esimaion period were capured by he explanaory variables. The model also has high overall significance. Wih an F-saisic value of 152.3, we canno rejec he hypohesis of a significan relaionship exising beween oupu (GDP) and he wo independen variables combined. Table 1 shows he OLS resuls. Table 1: The Ordinary Leas Square Resuls Variable Coefficien -Saisics Consan (C) INF SAV R-squared = 0.905; Adjused R-squared = 0.899; F-saisics = 152.3; DW= 0.52 Source: OLS Esimaion; 2012 A close examinaion of he individual coefficiens of he explanaory variables shows each has he expeced a priori sign, hus suggesing ha while inflaion ends o reduce oupu, savings acually simulaes oupu. However, he coefficien of inflaion is no significan in he model. I failed he 5 percen significan es and hus indicaes ha inflaion is no a poen facor in predicing oupu levels in Nigeria. On he oher hand, savings coefficien is highly significan even a he 1 percen level. This implies ha savings is criical in promoing oupu in Nigeria. Improving he saving capaciy in he economy can lead o significan boos in oupu in he long run. 451 Table 2: Granger Causaliy Tesing. Null Hypohesis Decision Causaliy F-value INF does no Granger cause GDP Accep GDP does no Granger cause INF Accep None SAV does no Granger cause GDP Rejec GDP does no Granger cause SAV Rejec Feedback SAV does no Granger cause INF Accep INF does no Granger cause SAV Accep None Source: Granger Causaliy Esimaions; The resuls in he able above shows ha he null hypohesis of causaliy running from INF o GDP canno be rejeced neiher can he reverse. We herefore accep he null hypoheses in boh cases and conclude ha no cause-effec relaionship exis beween inflaion and oupu in Nigeria. The null hypohesis of causaliy running from SAV o GDP or GDP o SAV, boh have highly significan F-value. This implies ha he null hypoheses are rejeced. Apparenly, a feedback relaionship exiss beween savings and oupu in Nigeria. Thus, savings changes cause changes in oupu and oupu movemens bring abou changes in oupu. This oucome is in line wih he neoclassical growh formulaions. The null hypoheses for causaliy from SAV o INF and INF o SAV also fail he significance es and imply ha here is acually no causaliy beween hese variables. Essenially, he Granger causaliy es shows ha changes in inflaion may no have simulaed nor sufficienly responded o Oupu growh or Savings in Nigeria over he period of analysis. Facors ouside oupu growh or savings changes may have had beer relaionships wih inflaion. On he oher hand, changes in savings effecively simulae oupu and oupu criically causes movemens in savings in Nigeria. Vecor Auoregression (VAR) Analysis In his secion, we repor he resul of he VAR esimaion as well as he impulse response funcions of he esimaes. Using a lag-lengh of 2 periods, he VAR resul is repored in able 3 below. The -raios of he coefficiens are repored below, each in brackes. From he resul, i can be seen ha one-

6 period lag GDP has a negaive bu insignifican impac on GDP. The significan coefficiens are hose of wo-period lagged GDP and boh of one-period and wo-period lagged Savings. The Savings oucome is quie ineresing. The one-period lag resul is negaive, while he wo-period has a posiive coefficien. This suggess ha, as suggesed by he Keynesian formulaion, curren Savings consiue leakages in he economy which may dampen Oupu in he shor erm. However, susained Savings overime ends o generae susainable Oupu growh overime. Inflaion has no significan impac on GDP as repored in he resuls. The Inflaion resul is acually poor because only wo-lagged INF has a significan (negaive) coefficien which indicaes ha afer some period, inflaionary pressure ends o moderae iself. In he Savings resul, one-lagged GDP has a posiive and significan coefficien; he same as he coefficien of one-lagged Savings. Twoperiod lagged Savings however is negaive and highly significan. This implies ha overime; individuals end o cu down on Savings. char repors he response of a paricular variable o one sandard deviaion innovaion or shock o iself and oher variables. The firs char shows ha GDP responds posiively o a shock in Savings while i responds negaively o a shock Inflaion. Boh of hese responses come afer 5-periods have elapsed. In he second char, Inflaion ends o rise afer 4- periods o a shock in GDP and hen i fell afer 9- periods have elapsed. The same paern of response is noed for Savings responses o he shocks in each variable, alhough i has a lesser ampliude. These resuls herefore show ha Oupu changes responds more criically o Savings changes han Inflaion. Boosing Savings will effecively simulae Oupu. This effec is re-enforcing in naure since rising Oupu also conribue o Savings growh in he long run. Thus, in he drive o generae higher Oupu levels in Nigeria, paricular focus should be on increasing he Savings level in he economy. Table 3: The Vecor Auoregression (VAR) Resuls GDP INF SAV GDP(-1) E ( ) ( ) ( ) GDP(-2) E ( ) ( ) ( ) INF(-1) ( ) ( ) ( ) INF(-2) ( ) ( ) ( ) SAV(-1) E ( ) ( ) ( ) SAV(-2) M -8.59E ( ) ( ) ( ) Consan (C) ( ) ( ) ( ) R-squared Adj.R squared F-saisic Source: Vecor Auoregression Esimaion; 2012 The diagnosic ess for he resuls are impressive for boh GDP and SAV resuls. They have very high R- squared values ha are higher han 99 percen. They also possess highly significan F-values ha indicae srong relaionship beween he dependen variables and heir respecive independen variables. The INF resul is no quie significan. The R-squared value of 0.30 is low and he model failed he overall significan es a he 5 percen level. Figures 1 o 3 are he chars for showing he impulse response funcions for each of he variables. Each 452

7 CONCLUSION AND RECOMMENDATION The primary goal of his sudy was o invesigae he inerrelaionship beween Inflaion, Savings and Oupu, oherwise referred o as Gross Domesic Produc (GDP) in Nigeria using he VAR approach. Using ime series annual daa obained from Cenral Bank of Nigeria (CBN) Saisical bullein for 2007 and 2010 and Annual Repor of 2010, Vecor Auoregreesion (VAR) empirical esimaion was conduced. To show he robusness of resuls and findings, Ordinary Leas Square (OLS) and Granger causaliy ess were conduced along side VAR. Generally, he empirical resuls were impressive. The OLS resul indicaes ha over 90 percen of he variaions in Oupu for he esimaion period were capured by he explanaory variables. Each of he individual coefficiens of he explanaory variables also show he expeced a priori signs suggesing ha while Inflaion ends o reduce Oupu, Savings acually simulaes Oupu. Essenially, he Granger causaliy es shows ha changes in Inflaion may no have simulaed nor sufficienly responded o Oupu growh or Savings in Nigeria over he period of analysis. On he oher hand, changes in Savings effecively simulae Oupu and Oupu also criically cause movemens in Savings in Nigeria. The VAR resuls affirmed ha Oupu changes responds more criically o Savings changes han Inflaion. From he empirical resuls, i is obvious ha boosing privae savings will effecively simulae Oupu in he Nigerian economy. This effec is re-enforcing in naure since rising Oupu also conribue o Savings growh in he long run and his is in agreemen wih heoreical lieraures. We have no doubs ha he empirical evidence obained in he sudy may have provided some useful hins on he behaviours or inerrelaionship beween Inflaion, privae Savings and Oupu (GDP) in he Nigerian economy. Accordingly, he empirical resuls may be considered a modes conribuion o he empirical lieraures on cause-effec relaionship beween Inflaion, Savings and Oupu or how Oupu responds o shocks in Inflaion and Savings in he Nigerian economy. Thus, we recommend houghs in his sudy o sakeholders in he economy, moneary and regulaory auhoriies, ha in he drive o generae higher Oupu in Nigeria, paricular focus should be on increasing Savings levels in he Nigerian economy. Gokal V and Hanif S, (2004), Relaionship beween Inflaion and economic Growh. Working paper, Economic Deparmen, Reserve Bank of Fiji, Suva Fiji Japelli T and Pagano M, (1994); Savings, Growh and Liquidiy Consrains. Quarerly Journal of Economics, Vol. 109, Pg Krieckhaus J, (2002); Reconcepualizing he Developmenal Sae: Public Savings and Economic Growh; World Developmen, Vol. 30 No 10, Pg Larry, (2006): The correlaion beween Inflaion and GDP?Yahoo!Answers.hp://answers.yahoo.com/ quesion Orubu O. (2009); Inflaion In Nigeria, Concep, measuremen and Conrol; Bullion, Publicaion of he Cenral Bank of Nigeria. Vol. 33 No 1 Quijano F and Quijano Y, (2003); Savings, Capial Accumulaion and Oupu Shoaib (2006); The correlaion beween Inflaion and GDP? Yahoo! Answers. hp://answers. yahoo. com/quesion Sims C. S, (1980); Macroeconomics and Realiy, Economerica, Vol. 48 No 1, Pg 1-48 Spencer D, (1999); Economic Models a he Bank of England, Bank of England. London. Tobin J, (1965); Money and Economic growh, Economerica, Volume 33 Pg REFERENCES Blanchard O, (2011); Macroeconomics; 5h Ediion; Englewood Cliffs; Prince Hall Fama F.E, (1981); Sock Reurns, Real Aciviies, Inflaion and Money; American Economic Review; Vol. 71 No 4, Pg