Eco. 521–—- 9-4-2021 (Online Discussion Quiz 1 on Monetary Theory and Practice)

Franklin Chidubem Lina
Msc/pg/19/89452
+2348145715046
Reasons why the monetary policies of the CBN does not align with the theoretical
Postulations of the Monetarist

Preamble
The major tenets of the monetarist has always served as the foundation of monetary policies of regulatory banks in different countries of the world. Nigeria’s situation is not different as the foundation of the nation’s monetary policy should be based on the postulation of these theories. This is because this theories provide well researched scenario for solving economic problems with relevant actions. In the last decade, findings show that the monetary policies of the Central Bank of Nigeria does not align with the postulations of the monetarist. This essay is an extensive analysis to support the above assertion as efforts will be made to discuss the monetary policies of the CBN of Nigeria and how such policies deviate from the assertions of the Monetarist.

Monetarist Theory
The general monetarist view is that the rate of monetary expansion is the main determinant of total spending, commonly measured by gross national product (GNP). Changes in total spending, in turn, influence movements in output, employment, and the general price level. A basic premise of this analysis is that the economy is basically stable and not necessarily subject to recurring periods of severe recession and inflation. Major business cycle movements that have occurred in tile past are attributed primarily to large swings in the rate of growth in the money stock.
This view regarding aggregate economic relationships differs from prevailing views which consider aggressive policy actions necessary to promote stability. Monetarists generally hold that fiscal actions, in the absence of accommodative monetary actions, exert little net influence on total spending and therefore have little influence on output and the price level. Government spending unaccompanied by accommodative monetary expansion, that is, financed by taxes or borrowing from the public, results in a crowding-out of private expenditures with little, if any, net increase in total spending. A change in the money stock, on the other hand, exerts a strong independent influence on total spending.
Monetarists conclude that actions of monetary authorities which result in changes in the money stock should be the main tool of economic stabilization. Since the economy is considered to be basically stable, and since most major business cycle movements in the past have resulted from inappropriate movements in the money stock, control of the rate of monetary expansion is the means by which economic instability can be minimized. The theoretical heritage of the monetarist position is tile quantity theory of money. This theory dates back to the classical economists (particularly David Ricardo) in the early 1800’s. The quantity theory in its simplest form is characterized as a relationship between the stock of money and the price level. Classical economists concentrated on the long run aspects of the quantity theory in which changes in the money stock result in changes only in nominal magnitudes, like the price level, but have no influence on real magnitudes like output and employment. The quantity theory of money in its modem form recognizes the important influence that changes in the money stock can have on real magnitudes in the short run, while influencing only the price level in the long run. The modern quantity theory postulates that in the short run a change in the rate of growth in money is followed with a moderate lag by changes in total spending and output, while changes in the price level follow with a somewhat longer lag. These changes in total spending, output, and prices are in the same direction as the change in the rate of monetary expansion.

Monetarist and CBN Monetary Policies
Monetary policies are a reflection of decisions made on invest rate, money supply and spending. The CBN monetary policies recently do not seem to be grounded in the postulations of the monetarist theory as a result of several issues which may include
1. Instability of the Economy
2. Huge cost of governance
3. Service of High Debt Profile
4. Uncontrolled Inflation
One of the constant factors in the monetarist postulation is stability of an economy. It is argued that a monetary policies will be effectively decided in an economy that is free from consistent recession and other issues concerned with unstable economies. Within the space of six years, Nigeria has experienced at least two recession. The first happened during the transition to power of the newly elected government in 2016 and during the pandemic, another recession occurred. These instances deter the CBN from formulating policies based on the spending exercise by monetary authorities and the transaction of the people.
Cost of governance is the cost incurred in running the government. It is the cost of performing political duties, and discharging civil services to the public. Cost of maintaining law and other in Nigeria is expensive, affecting the monetary policies of the CBN. From a political economy perspective, the state is the by-product of rational individuals who believe that state formation would be better than living as individual or families. The state, therefore, as well as being the government’s instrument of operation, is a natural monopoly, for no two organizations with equal powers of force over a defined territory can co-exist successfully and maintain relative peace. The state enables individuals to co-exist peacefully by avoiding violence and reducing tendency for communal and individual clashes. Unfortunately, people elected into the post of power steal the available resource of the country. The consequence of this is that CBN may try to favour elites in their monetary policies without considering the right foundation for formulating such policies.
Analysis of the data shows that the federal government’s external borrowing climbed 32.38% to $27.16 billion, while States including FCT grew by 5.10% to $4.27 billion. On the domestic debt side, the national government debt increased by 52.19% to $43.78 billion, while the States and the FCT rose by 15.43% to $12.94 billion as of June 2019. Overall, total external debt stood at $27.16 billion, while total domestic debt stood at $56.72 billion in 2019. High level of borrowing by the Nigerian government should reflect in the transactions of Nigerians which is a basis in the monetarist postulation towards monetary policies. However, the cost of servicing this high debt profile restrain the CBN in forming policies that is dependent on the transactions and spending of the country.
From market women to government workers to politicians, everyone knows inflation is a recurring problem in Nigeria. There is hardly any Nigerian who is not affected by the consistent rise in the prices of goods and services in the country. Uncontrolled inflation can dislocate the economy and cause socio-economic disaster. Nigeria has witnessed high and volatile inflation rates since 1970s. The high inflation episodes in the country since the 1970s were largely driven by the growth of money supply and some factors reflecting the structural characteristics of the economy. These factors included climatic conditions, wage increases, the structure of production, currency devaluation and changes in terms of trade.
By 1988 and 1989, inflation had skyrocketed to more than 50 per cent in Nigeria. In spite of the fact that inflation declined to about 7.5 per cent in 1990, it rose to 44.8%, 57.2% and 57%, respectively, in 1992, 1993 and 1994. It reached an all-time high of 72.8 per cent in 1995. Previous researches indicate that lagged CPI, expected inflation, petroleum prices and real exchange rate significantly propagate the dynamics of inflationary process in the country. Consequently, efforts of the monetary authorities to achieve price stability would continuously be disrupted by volatility in the international price of crude oil.

Conclusion
Monetarist postulation is an important principle guiding the formulation and implementation of monetary policies around the world. The principle asserts that in a stable economy, the spending of monetary authorities should determine the supply and management of money in the economy It is quite unfortunate that CBN monetary policies does not align with the postulation of the monetarists/ This essay has extensively discuss the reasons why such the assertion should hold by considering four major points which includes the Instability of the economy, high cost of governance, service of high debt profile, and uncontrolled inflation.

NAME: NWUFO LYNDA CHIAGOZIE
REG NUMBER: PG/MSC/19/91295
DEPARTMENT: ECONOMICS

The monetarist theory is an economic concept that contends that changes in money supply are the most significant determinants of the rate of economic growth and the behavior of the business cycle. When monetarist theory works in practice, central banks, which control the levels of monetary policy, can exert much power over economic growth rates. According to monetarist theory, money supply is the most important determinant of the rate of economic growth. According to monetarist theory, if a nation’s supply of money increases, economic activity will increase—and vice versa.
Monetarist theory is governed by a simple formula: MV = PQ, where M is the money supply, V is the velocity (number of times per year the average dollar is spent), P is the price of goods and services and Q is the quantity of goods and services. Assuming constant V, when M is increased, either P, Q, or both P and Q rise. General Price levels tend to rise more than the production of goods and services when the economy is closer to full employment. When there is slack in the economy, Q will increase at a faster rate than P under monetarist theory.
The ultimate objective of monetary policy is to promote sound economic performance and high living standards of the citizens. This makes monetary policy a key element of macroeconomic management and its effectiveness is crucial to the overall economic performance of Nigeria. Naturally, the formulation and implementation of monetary policies in the country is expected to align with the theoretical postulation of the monetarist. Unfortunately, this is not always the case. There exists major challenges to the conduct and implementation of monetary policy in Nigeria which undermine the effectiveness of monetary policy to include non-monetized Nigerian rural sector, underdeveloped money and capital markets, and large quantity of money outside the banking system. Others include poor data quality, proliferation of illegal financial houses, and poor banking habits in the economy.
However, monetary policy when developed and conducted efficiently has the capacity to influence the real sectors of the economy and positively influences all the key drivers of inclusive growth in Nigeria. To make monetary policy more effective and responsive to inclusive growth in Nigeria, it is recommended that the government must play a central role in coordination between banks and others to expand efforts to support key industries; it should also pursue further improvements in areas such as health care, education, infrastructure and access to capital; embark on greater harmonization of monetary and fiscal policy so as to have internal consistency necessary for all the policies to achieve the desired impact on the real productive sectors; strengthen its machinery for providing timely and reliable data for efficient planning in the system. Finally, monetary policy should be complemented by growth-oriented and job creating fiscal, industrial and labor policies. Although monetary policy can contribute to inclusive and sustainable growth when developed and employed efficiently, there is the need to recognize the limitations of monetary policy and hence acknowledge that other macroeconomic policies, policy makers and stakeholders also have an important and significant role to play in achieving both inclusive and sustainable growth in Nigeria.

The monetarist theory is an economic concept that contends that changes in money supply are the most significant determinants of the rate of economic growth and the behavior of the business cycle. When monetarist theory works in practice, central banks, which control the levels of monetary policy, can exert much power over economic growth rates. According to monetarist theory, money supply is the most important determinant of the rate of economic growth. According to monetarist theory, if a nation’s supply of money increases, economic activity will increase—and vice versa.

Monetarist theory is governed by a simple formula: MV = PQ, where M is the money supply, V is the velocity (number of times per year the average dollar is spent), P is the price of goods and services and Q is the quantity of goods and services. Assuming constant V, when M is increased, either P, Q, or both P and Q rise. General Price levels tend to rise more than the production of goods and services when the economy is closer to full employment. When there is slack in the economy, Q will increase at a faster rate than P under monetarist theory.

The ultimate objective of monetary policy is to promote sound economic performance and high living standards of the citizens. This makes monetary policy a key element of macroeconomic management and its effectiveness is crucial to the overall economic performance of Nigeria. Naturally, the formulation and implementation of monetary policies in the country is expected to align with the theoretical postulation of the monetarist. Unfortunately, this is not always the case. There exists major challenges to the conduct and implementation of monetary policy in Nigeria which undermine the effectiveness of monetary policy to include non-monetized Nigerian rural sector, underdeveloped money and capital markets, and large quantity of money outside the banking system. Others include poor data quality, proliferation of illegal financial houses, and poor banking habits in the economy.
However, monetary policy when developed and conducted efficiently has the capacity to influence the real sectors of the economy and positively influences all the key drivers of inclusive growth in Nigeria. To make monetary policy more effective and responsive to inclusive growth in Nigeria, it is recommended that the government must play a central role in coordination between banks and others to expand efforts to support key industries; it should also pursue further improvements in areas such as health care, education, infrastructure and access to capital; embark on greater harmonization of monetary and fiscal policy so as to have internal consistency necessary for all the policies to achieve the desired impact on the real productive sectors; strengthen its machinery for providing timely and reliable data for efficient planning in the system. Finally, monetary policy should be complemented by growth-oriented and job creating fiscal, industrial and labor policies.
Although monetary policy can contribute to inclusive and sustainable growth when developed and employed efficiently, there is the need to recognize the limitations of monetary policy and hence acknowledge that other macroeconomic policies, policy makers and stakeholders also have an important and significant role to play in achieving both inclusive and sustainable growth in Nigeria.

THE FORMULATION AND IMPLEMENTATION OF MONETARY POLICY IN THE COUNTRY BY THE CENTRAL BANK IS EXPECTED TO ALIGN WITH THE THEORETICAL POSTULATIONS OF THE MONETARIST. HOWEVER ON MANY OCCASIONS, THIS IS NOT ALWAYS THE CASE. YES, I AGREE THIS IS NOT ALWAYS THE CASE.

Every country including Nigeria has myriad of problems staring it in the face. These problems can broadly be classified into social, political and economic problems. A number of stabilization policies like the monetary and fiscal policies are usually used to solve the economic problems of a country. The economic problems of a country may be that the prices of goods and services are rising too fast (inflation), or that many people are unemployed or losing their jobs (unemployment), or that the country is not producing enough goods and services for domestic consumption (declining national output) which may lead to the country importing more goods than it exports (deficit balance of payments).

Monetary policy is a deliberate policy of the government, through the monetary authorities (Central bank), to control the volume, cost, direction and availability of money and credit in the economy. It is also a credit control measure adopted by the central banks to control the supply of money as an instrument for achieving the desired economic objectives. Since the establishment of the central bank of Nigeria (CBN) in 1959, it has continued to play its traditional role which is the regulation of stock of money in such a way as to promote social welfare. The role is anchored on the use of monetary policy which is usually targeted towards the achievement of full employment, rapid economic growth, price stability and favorable balance of payment position.

Monetarist theory asserts that variations in money supply have major, influences on national output in the short run and on price levels over longer periods. Monetarists assert that the objectives of monetary policy are best met by targeting the growth rate of the money supply. They warn that increasing the money supply only provides a temporary boost to economic growth and job creation. Over the long run, increasing the money supply increases inflation because as demand exceeds supply, prices will rise to match. When the money supply expands, it lowers interest rates. This is due to banks having more to lend, so they are willing to charge lower rates and consumers borrow more to buy items like houses, automobiles, and furniture. On the other hand, decreasing the money supply raises interest rates, making loans more expensive and this slows economic growth.

The Central bank reduces inflation by raising the interest rate or decreasing the money supply, this is known as contractionary monetary policy. However, the Central bank must be careful not to tip the economy into recession. To avoid recession, and the resultant unemployment, the Central bank must lower the interest rate and increase the money supply; this is known as expansionary monetary policy.

Monetary policy usually focuses on money supply as a means of achieving economic objectives. If the government thinks that economic activity is very low, it can stimulate economic activities again by increasing the money supply, but, when the economy is booming so much that the rate of inflation is high; it will reduce the supply of money. This will reduce the supply of money, reduce aggregate demand and general price level. However, this increase can also lead to unemployment and stunted economic growth, thus it is usually difficult to achieve all the macroeconomic objectives simultaneously.

One of the major objectives of monetary policy in Nigeria is price stability. However, despite the instruments that have been adopted over the years, inflation still remains a major threat to Nigeria’s economic growth. Over the years, so many instruments of monetary policy have been adopted to gear-up the level of investment, but unemployment, price level fluctuations, lack of sustainable economic growth, balance of payment disequilibrium and unsatisfactory expansion of domestic output have consistently and persistently done severe damage to the Nigerian economy.

Price level stability is managed so as to avoid inflation, the level of unemployment is monitored to avoid increase in unemployment of human resources while the national output is monitored to ensure that the natural and mineral resources of the nation are efficiently harnessed. This is to avoid declining productivity to ensure that enough goods and services are produced for local consumption and exports. These targets of monetary policy (price stability, full employment, economic growth and balance of payment equilibrium) are conflicting because an attempt to achieve one requires the formulation of policies that will make difficult to achieve the other. It is impossible to achieve all the objectives of monetary policy simultaneously. Central bank are therefore, compelled to accept a trade- off between one objective and the other at each point in time, considering the state of the economy and the policy objective being pursued.

THE FORMULATION AND IMPLEMENTATION OF MONETARY POLICY IN THE COUNTRY BY THE CENTRAL BANK IS EXPECTED TO ALIGN WITH THE THEORETICAL POSTULATIONS OF THE MONETARIST. HOWEVER ON MANY OCCASIONS, THIS IS NOT ALWAYS THE CASE. YES, I AGREE THIS IS NOT ALWAYS THE CASE.
Every country including Nigeria has myriad of problems staring it in the face. These problems can broadly be classified into social, political and economic problems. A number of stabilization policies like the monetary and fiscal policies are usually used to solve the economic problems of a country. The economic problems of a country may be that the prices of goods and services are rising too fast (inflation), or that many people are unemployed or losing their jobs (unemployment), or that the country is not producing enough goods and services for domestic consumption (declining national output) which may lead to the country importing more goods than it exports (deficit balance of payments).
Monetary policy is a deliberate policy of the government, through the monetary authorities (Central bank), to control the volume, cost, direction and availability of money and credit in the economy. It is also a credit control measure adopted by the central banks to control the supply of money as an instrument for achieving the desired economic objectives. Since the establishment of the central bank of Nigeria (CBN) in 1959, it has continued to play its traditional role which is the regulation of stock of money in such a way as to promote social welfare. The role is anchored on the use of monetary policy which is usually targeted towards the achievement of full employment, rapid economic growth, price stability and favorable balance of payment position.
Monetarist theory asserts that variations in money supply have major, influences on national output in the short run and on price levels over longer periods. Monetarists assert that the objectives of monetary policy are best met by targeting the growth rate of the money supply. They warn that increasing the money supply only provides a temporary boost to economic growth and job creation. Over the long run, increasing the money supply increases inflation because as demand exceeds supply, prices will rise to match. When the money supply expands, it lowers interest rates. This is due to banks having more to lend, so they are willing to charge lower rates and consumers borrow more to buy items like houses, automobiles, and furniture. On the other hand, decreasing the money supply raises interest rates, making loans more expensive and this slows economic growth.
The Central bank reduces inflation by raising the interest rate or decreasing the money supply, this is known as contractionary monetary policy. However, the Central bank must be careful not to tip the economy into recession. To avoid recession, and the resultant unemployment, the Central bank must lower the interest rate and increase the money supply; this is known as expansionary monetary policy.
Monetary policy usually focuses on money supply as a means of achieving economic objectives. If the government thinks that economic activity is very low, it can stimulate economic activities again by increasing the money supply, but, when the economy is booming so much that the rate of inflation is high; it will reduce the supply of money. This will reduce the supply of money, reduce aggregate demand and general price level. However, this increase can also lead to unemployment and stunted economic growth, thus it is usually difficult to achieve all the macroeconomic objectives simultaneously.
One of the major objectives of monetary policy in Nigeria is price stability. However, despite the instruments that have been adopted over the years, inflation still remains a major threat to Nigeria’s economic growth. Over the years, so many instruments of monetary policy have been adopted to gear-up the level of investment, but unemployment, price level fluctuations, lack of sustainable economic growth, balance of payment disequilibrium and unsatisfactory expansion of domestic output have consistently and persistently done severe damage to the Nigerian economy.
Price level stability is managed so as to avoid inflation, the level of unemployment is monitored to avoid increase in unemployment of human resources while the national output is monitored to ensure that the natural and mineral resources of the nation are efficiently harnessed. This is to avoid declining productivity to ensure that enough goods and services are produced for local consumption and exports. These targets of monetary policy (price stability, full employment, economic growth and balance of payment equilibrium) are conflicting because an attempt to achieve one requires the formulation of policies that will make difficult to achieve the other. It is impossible to achieve all the objectives of monetary policy simultaneously. Central bank are therefore, compelled to accept a trade- off between one objective and the other at each point in time, considering the state of the economy and the policy objective being pursued.

The above assertion points out to the potency of monetary policy application and implementation by the CBN in alliance with the theoretical postulation of the monetarists. This is not always the case in our dear country, Nigeria. The subject has remained alive globally, owing mainly to the importance of the issues for macroeconomic management and monetary policy in particular. It is important to know that this economic failure is not pertinent to Nigeria alone but countries that have failed to address pressing key economic, socio-cultural issues such as corruption, nepotism, tribalism and diligence in the monetary authority decisions and action. Policymakers need to know always how monetary policy affects the real economy and whether aiming to control money matters for the goal of stabilizing prices. To that extent, knowledge of the demand for money will continue to prove essential. Today, some of the policy-related developments that motivated the rigorous investigation of demand for money in Nigeria have not changed substantially with its instruments and strategies remaining the same. For example, the Central Bank of Nigeria (CBN) in 1974 adopted monetary targeting as the framework for the implementation of monetary policy. One of the key requirements for a successful targeting of monetary aggregates is the stability of money demand. Knowing the arguments of money demand is essential in the selection of instruments and targets, just as the transmission mechanism of monetary policy depends on the arguments of the demand for money. Till date, the Central Bank of Nigeria has continued to target money as its main monetary policy strategy using primitive instruments and variables.

Nevertheless, every fresh attempt at studying the demand for money in Nigeria must be vigorously justified. The demand for money itself is a dynamic phenomenon. The determinants of money demand change over time especially with consideration of the growing trends in financial innovation. In the past, many studies had, for example, reported interest rate neutrality in the demand for money function in Nigeria owing to the undeveloped nature of the financial market and narrow range of financial assets, such that rather than substituting between cash and financial assets, economic agents tended to substitute between cash and physical assets. It will be interesting and useful to know if this situation has changed in view of recent milestones in financial deepening. This fallacy would have been avoided and the monetarists’ postulation on the issue in question would have been valid.

It is therefore important when studying demand for money in Nigeria to know that that income, expected inflation rate, and other proxies of opportunity cost (equity yield, real discount rate, expected exchange rate depreciation) generally perform well in money demand functions using Nigerian data. The particular opportunity cost variable is critical to finding a significant, negative relationship as suggested by theory. In addition, there seems to be some consensus on income as an appropriate scale variable and stability of parameters of the demand for money function. Stable demand for money is especially important as it suggests that targeting monetary aggregates (M2 in particular) is key to boosting economic activity and that they remain a viable monetary policy instrument for Nigeria. Interestingly, it is worthy of note that the income elasticity of money demand tends to be higher when a broad definition of money is used, sometimes even higher than unity. Using other countries’ data, have similarly reported income elasticity higher than one. Finally, it is pertinent to note that the presence of endogenous structural breaks even though findings have differed with respect to the exact point in Nigerian data. This is as a result of the swift change in strategies and instruments not recognized by the monetary authority of our dear country, Nigeria.

On the supply side, the Central bank of Nigeria claimed she printed more money to support the country( according to the Governor OF C.B.N, Godwin Emefiele on 16th of April, 2021 ; http://www.nigerianewsnow.com). It is important to note that printing of money does not necessarily increase economic output, it only increase the amount of money in circulation. It is also important to mention that the printing of money not backed by the nation’s Gold reserve is as deadly as the scary Covid Virus as this has a deadly effect on the national economy. According to the Monetarist using the debate on the expansionary monetary policy, an increase in money supply backed by a reduction in interest rate is directed to increase the productivity of th national economy. But if money printed is not centered on productive projects, it will have a negative effect on the country’s economy. Though the GDP will increase as a result of the increase in money circulation, but will lead to a situation termed ‘money illusion’. You have more money but goods are too expensive. Inflation sets in and other economic disadvantages gradually take their respective place. On the other hand, if the printed money had been backed by the gold reserve and utilized on productive projects, the postulate of the expansionary monetarists will have being valid and as such helped the nation’s economy.

ATTAH JULIUS:
PG/MSC/19/91728:
07034494802.

MONETARY POLICY OF THE COUNTRY DO NOT ALWAYS ALIGN WITH THE THEORETICAL POSTULATIONS OF MONETARIST SCHOOL OF THOUGHT.

this is true for some reasons.
1) countries are unique and the dynamics of ensuring efficiency may differ also: therefore holding on strictly to postulations May DO more harm than good without putting the dynamics into consideration.
2) developing countries like Nigeria are still faced with structural issues that May break some “ceteris paribus” assumptions of most postulations. Ie some factors considered constant May actually vary or do not even exist entirely in the COUNTRY owing to other factors exogenous to the considerations of the theory.
Etc.

THE MONETARIST THEORY:

Monetaarist school of thought, led by Milton Friedman was propounded as a direct criticism of the Keynesian approach(which suggest that controlling government expenditure through fiscal policy is the key to ensuring growth and stable economy especially during periods of economic downturn or recession). In contrast the monetarists believe that money supply is the key determinant of growth and regulating the economy. If a nation increases it’s supply of money, economic activities will increase and therefore the focus of growing the economy is majorly determined by the central bank that regulates the money supply through various monetary policies by ensuring stable prices ie keeping inflation at low level, preferably at single digit and promoting full employment of resources to achieve steady growth.
The monetary theory equation is given as:
MV=PQ
Where M is the money supply level, V is the velocity of money or the rate money changes hand in the economy through transactions(here velocity is assumed to be constant), P is the General price level and Q is the output level.

Now since velocity is assumed to be constant in the equation then it implies that. M=PQ where PQ=Y which is the growth indicator of the economy. Telling us that growth is a direct function of money supply.

Now the intricacies of this postulation Is still based on certain assumptions that can be violated.
For instance:
1) increasing money supply in real life without a back up plan on increasing the productivity of factor inputs will only lead to so many money chasing few goods(hyper-inflation) therefore increasing money supply would have checked for such leakages.

2) some sectors of the economy in developing countries like Nigeria are still very under developed and May not even be factored in when considering the effect of the money supply because the sector hardly deals with the financial sectors like the timid farmers that May be rich but hardly use local means to sort their needs, hardly influenced by inflation or encouraged by bank interest rate. These sectors are more in under developed countries and May shock the monetarist on how they survive, bypassing some of these postulated channels. Their output May be seen in the market but they may not be fully integrated into the financial sector because of poor financial deepening.
3) business cycles: in the presence of huge downturn in the business sector the economy decision Makers Maybe forced to employ other mix of policies to be able to reverse the trend.
4) activities in underground economies: these are sectors of the economy that are not actually factored into the GDP but May have huge impact on the economic output. E.g.includes the drug dealers and other contraband businesses. They have great impact on the economy yet the financial policies May not really alter their expenditure and behavioral pattern.

In conclusion, central bank monetary policy May not necessarily reflect monetarist theory postulations because of the above mentioned reasons and therefore it is always better in practice to go for what works for the COUNTRY in question than sticking to postulations, these also gives room to augment the postulatuons to a more recent and efficient theories through research and innovations.

THE FORMULATION AND IMPLEMENTATION OF MONETARY POLICY IN THE COUNTRY BY THE CENTRAL BANK IS EXPECTED TO ALIGN WITH THE THEEORETICAL POSTULATIONS OF THE MONETARIST.HOWEVER, ON MANY OCCASIONS THIS IS NOT ALWAYS THE CASE.

YES, I agree, the statement is true, but we need to understand what monetarist believed about monetary policy.
The monetarist theory, as popularized by Milton friedman, asserts that money supply is the primary factor in determining inflation/deflation in an economy. According to the theory monetary policy is a much more effective tool than the fiscal policy for stimulating the economy or slowing down the rate of inflation.
The monetarist believed that inflation in the economy is the monetary phenomenon, in other words, what causes inflation to increase in any country is because of money supply, too much money in circulation. But of course, inflationary tendency or dynamics in any economy is not solely monetary determinant or not solely determent by monetary policy like rising of interest rate, exchange rate policy, credit control etc.
There is what called fiscal dominant , in other words, you could have fiscal sector dominating economic dimensions in sense that government incurring too much debt ,incurring debt financing, government public expenditure trying to cover what we called fiscal deficit which could contribute to liquidity surfeit like too much liquidity in the system has implications for inflationary tendency and dynamics.
Apart from the above , we also have structural problem ,structural issues that contribute to inflation, in the sense that for instance ,we could have infrastructural constraint that make businesses and firms to markup their prices, we could have infrastructural constraint that make cost of transportation to increase from one location to another or interstate movement in one side.
Unexpected issues like insecurity that displaced farmers from their farms. Farmers are no longer going to farms and for that reason, there is a spit in food inflation.
We could also have some policy that affect inflationary tendency, for instance the borders closure we have before now.
Putting all these together, you agree with me that implementation of monetary policy does not necessarily align with theoretical postulation of the monetarist, considering the monetary policy like Fisher’s equation which state that
MV=PT
Where transaction velocity of money equals average price per transaction and number of transactions conducted in a country. We can see that the above relationship in not applicable in real terms and that is why in empirical analysis, economists are beginning to think of modification of new Keynesian framework in understanding of the dynamics of inflation in any country.
The answer is yes, it does not align in many occasions, otherwise the target of single digit inflation could been attained by the manipulation of monetary policy only. But as we can see in Nigeria, this is not always achievable. The current inflation rate is about the region of 17.3% different from the target of single digit of CBN is pursuing. The simple reason is because of all these issues that are so far itemized especially the fiscal activities.
This is why the discussion centered on fiscal, monetary coordination, the two side must coordinate, must come together to see how to achieve efficient macroeconomic management.