Effect of Monetary policy on food inflation in Nigeria: Evidence from Quantile Regression Model

Abstract

This study examines the effect of monetary policy on food inflation in Nigeria using a quantile regression model and monthly data from January 2004 to October 2021. The results of the study reveal that food inflation falls by 0.41 and 0.69 percent at the 25th and 50th quantiles, respectively, following a restrictive monetary policy by the apex bank in Nigeria. As the exchange rate depreciates, food inflation rises by 8.92 percent at the 25th quantile, 12.6 percent at the median, and later falls to 16 percent at the 90th quantile. The real GDP is significant across all quantiles. Lastly, the oil price is positive and significant at the OLS estimate and the 90th quantile. The study recommends unconventional monetary policies for improving supply chain of agricultural products.