No abstract

This work provides an answer to the question: what should be the appropriate monetary policy under different inflationary conditions (that is, demand-pull and cost-push inflations) and what should be the effect of this nondistinction in the direction of monetary policy? Since no modern economy is autarky, the Nigerian economy is considered and examined analytically. Therefore, a conclusion that the problem of macroeconomic instability faced-with in countries like Nigeria, is as a result of the applications of inappropriate adjustments in monetary policy under different inflationary conditions is drawn. Thus, a recommendation that expansionary monetary policy be adopted for such countries is prescribed, but to an extent where a unit increase in cost must correspond with a unit increase in broad money supply. Likewise, such economies like Nigeria are encouraged to increase their exports and reduce imports in order to redress the problems of cost-push (imported) inflation.