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Analysis of Monetary Policy and Economic Growth in Nigeria

Author

Listed:
  • Mohammed Modu

    (Department of Economics Umar Ibn Ibrahim El-Kanemi College of Education Science and Technology, Bama Borno State Affiliate University of Maiduguri)

  • Mustapha M.Kime

    (Department of Economics Umar Ibn Ibrahim El-Kanemi College of Education Science and Technology, Bama Borno State Affiliate University of Maiduguri)

  • Buba M. Yunusa

    (Department of Economics Umar Ibn Ibrahim El-Kanemi College of Education Science and Technology, Bama Borno State Affiliate University of Maiduguri)

Abstract

This study investigates the relationships between monetary policy and economic growth in Nigeria for the period spanning from 1990 to 2022. Time series data on Gdp, money supply, interest rate and exchange rate are sourced from WDI and CBN. The study used ADF and PP unit root test. cointegration test is performed with Johegnsen cointegration test. The short and long run relationship are tested using ARDL Bound test approach while Granger causality test for the determining the direction of causality. Unit root test result indicates that variables attained stationarity at level and first difference I(0)and I(I). cointegration test result reveal the presence of at least two Cointegrating vectors. Findings on ARDL bound test shows the existent of long rung relationships among the variable. The error correction analysis for short run also indicate the presence of short run relation with 95% adjustment speed towards long equilibrium Granger causality test is conducted to ascertain the directions of causal relations among the variable and findings indicates unidirectional causality is running from interest rate to exchange rate The study recommends that Central Banks of Nigeria should strengthen the monetary policy accountability and credibility to maintain a short, medium, and long-run focus on improving their Monetary Policy frameworks. This can be done by obtaining the optimal money supply that would sustain economic growth in these countries.

Suggested Citation

  • Mohammed Modu & Mustapha M.Kime & Buba M. Yunusa, 2023. "Analysis of Monetary Policy and Economic Growth in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(10), pages 319-334, October.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:10:p:319-334
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    References listed on IDEAS

    as
    1. Ismail O Fasanya & Adegbemi B.O Onakoya & Mariam A Agboluaje, 2013. "Does Monetary Policy Influence Economic Growth in Nigeria?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(5), pages 635-646.
    2. John B. Taylor, 1995. "The Monetary Transmission Mechanism: An Empirical Framework," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 11-26, Fall.
    3. Ismail O. FASANYA & Adegbemi B.O ONAKOYA & Mariam A. AGBOLUAJE, 2013. "Does Monetary Policy Influence Economic Growth in Nigeria?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(5), pages 635-646, May.
    4. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
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