ESTIMATION OF THE SACRIFICE RATIO BETWEEN INFLATION AND GROWTH IN NIGERIA

Relying on the adaptive expectations Augmented Phillips Curve approach, the study estimated the sacrifice ratio for inflation that is conducive for growth in Nigeria and found the ratios for the constructed models I and II to be positive. The sacrifice ratio measures how much output is lost in the country when inflation is reduced by 1 percentage point through monetary policy action. The outcome of our study suggests that a 1 percent disinflation accomplishment leads to an output loss of 0.07%. Also, for a given period, power of persistence effect coefficient is 0.71 on the average, suggesting that, disinflation policy has a more robust and long-lasting impact on the country’s real GDP.