The Effect of Inflation on Technological Development in Nigeria

Abstract

This paper analysed the effect of inflation on technological development in Nigeria. In an inflation-targeting regime, the monetary authority adjusts the nominal interest rate in order to converge current inflation to the established target. It adjusts the interest rate of financial institutions, changing the opportunity cost of investments. As a result, rising inflation promotes a reduction in R&D investments demand, reducing the rate of technological progress. In the empirical exercise of the model, the estimated coefficient of elasticity of technological investments is negatively affected by inflation.