Understanding the Economic Development Implications ofTrinity Policy Trade-offs: A Focus on Poverty Headcount in Nigeria

ABSTRACT: Drawing support from the Mundell-Fleming framework, this study provides insights into theeconomic development implications of trinity policy goals (monetary autonomy, exchange rate stability andfinancial integration) in Nigeria between 1980 and 2020. Poverty headcount was used as a proxy for economicdevelopment. The external reserve is introduced to the empirical model in recognition of its role in stimulatingthe effectiveness of trinity policy goals. Data for the variables were sourced from the National Bureau ofStatistics, CBN Statistical Bulletin and World Bank World Development Indicators (WDI) among others.Descriptive statistics, graphical illustration, Pairwise correlation, Phillips-Perron unit root test, boundscointegration and ARDL model form the basis for data analysis. The unit root test results reveal that thevariables are mixed integrated. It was also found from the ARDL estimates that monetary autonomy and capitalmobility have a significant positive effect on poverty headcount in both the short and long run. This suggeststhat more monetary policy sovereignty and openness of the financial architecture yield positive benefits ofsustainable reduction in poverty and improved living standard. Given the findings, this study recommends thatpolicymakers should gradually relax restrictions on capital mobility and promote appreciable monetarysovereignty to provide a roadmap for a sustainable reduction in poverty in Nigeria.

Keywords: Trinity trade-offs, Poverty headcount, monetary autonomy, exchange rate stability financialintegration and Nigeria