The inference that is derivable from this is that the

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The inference that is derivable from this is that the growth of the economy moves in tandem with the growth of money supply and capital accumulation, especially in the absence of persistent inflation and policy inconsistency. Empirical estimates show that while money supply and capital accumulation can spur growth, inflationary pressure retards growth. However, there is need to investigate further the determinants of growth within Tobin’s monetary growth framework using relatively more sophisticated econometric techniques. This would require the application of such methods as generalized moment of methods and principal components. It is anticipated that such methodologies may reveal the presence of neutrality or even super neutrality of money that could not be established by the unrestricted error correction model. Notes 1. Real gross domestic product (GDP) serves as a proxy for economic growth 2. Precisely for the case of Nigeria(a resource dependent economy), higher global crude oil prices and expansion of crude oil exports have significantly raised foreign exchange earnings and the over valuation of the domestic currency which artificially cheapened exports relative to imports. 3. The weight of food accounts for 70 per cent in the computation of Nigeria’s consumer price index. 4. The current global financial melt-down has weakened growth considerably in the first quarter of 2009 to 4.85 per cent from 5.75 per cent estimated for 2008 and projections for the future are not encouraging. 5. Orthogonality, in line with the quantity theory of money-also referred to as the (super)neutrality of money- says that a permanent increase in the growth rate of money leaves output and velocity unaffected in the long run. If there is a positive effect of money growth on output, it only holds in the short run. 6. Neutrality holds if the equilibrium values of real variables are independent of the level of the money supply in the long-run while super neutrality holds when real variables - including the rate of growth of GDP - are independent of the rate of growth in the money supply in the long-run.
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162 Musibau Adetunji Babatunde & Muhammed Isa Shuaibu 7. See Orphanides and Solow (1990) for a complete survey of this literature 8. There are two assets in this model and they are money (M) and capital (K) denoted as y t = f ( α ) where α = k t + m t . In addition, the production function is said to be well behaved and satisfies the inada condition. 9. Where 1 t t t N n N - = is the population growth rate and dividing both sides of equation 2 by N t and using the result to eliminate t t K P from equation 3yields equation 4 10. Changes in nominal money stock occur via lump sum transfer, τ , so that it is equal to the real per capita value of the change in nominal quantity of money. Substituting for (1 )(1 ) t t t M n τ = θ + π + into equation 6, invoking equation 1 and further simplification yields.
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