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Monetary Policies and the Achievement of Bank Profit Objective

Author

Listed:
  • Alexander Ehimare Omankhanlen

    (Covenant University, Ota, Nigeria)

  • Noah Ilori

    (Covenant University, Ota, Nigeria)

  • Areghan Isibor

    (Covenant University, Ota, Nigeria)

  • Lawrence Uchenna Okoye

    (Covenant University, Ota, Nigeria)

Abstract

This study examined the nexus between monetary policy and the achievement of a bank’s profit objective. There have been lots of arguments about the benefits of monetary policy implementation on deposit money bank’s operations, since the policies have been seen to impact on their performance. This study was carried out to establish the influence of variables like Liquidity Ratio, Interest and Money supply (M2), which are used as monetary policy instruments, on deposit money bank profitability objective. The study covers the period from 2002-2019. The Auto Regressive Distributed Lag and Error correction model were adopted in the analysis of the data. The study revealed that there was a positive long run relationship between Liquidity Ratio and deposit money bank’s profitability; there also existed a negative long run relationship between interest rate and deposit money bank profitability; lastly, there existed a positive long run relationship between Money Supply (M2) and deposit money bank’s profitability. Based on the findings, monetary authorities should put in place measures for Liquidity ratio, interest rates and M2 implementation to aid deposit money banks operations in the achievement of their profit objective.

Suggested Citation

  • Alexander Ehimare Omankhanlen & Noah Ilori & Areghan Isibor & Lawrence Uchenna Okoye, 2021. "Monetary Policies and the Achievement of Bank Profit Objective," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(2), pages 201-220.
    • Handle: RePEc:cbk:journl:v:10:y:2021:i:2:p:201-220
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    File URL: http://www.cbcg.me/repec/cbk/journl/vol10no2-10.pdf
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    Citations

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    Cited by:

    1. Areghan A. Isibor & Adetiloye A. Kehinde & Olokoyo O. Felicia & Adesina F. Tolulope & Akinjare A. Victoria & Udume E. Mercy, 2022. "Achieving Sustained Performance in the Nigerian Oil and Gas Sector despite Exchange Rate Fluctuations: A VAR Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 341-351, May.
    2. Dilesha Nawadali Rathnayake & Yang Bai & Pierre Axel Louembé & Li Qi, 2022. "Interest Rate Liberalization and Commercial Bank Performance: New Evidence From Chinese A-Share Banks," SAGE Open, , vol. 12(2), pages 21582440221, May.

    More about this item

    Keywords

    Monetary Policy; Profit; Banks; Interest Rates; Money; Credit.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

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