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Monetary Policy Cyclicality, Industrial Output and Economic Growth Interactions in Nigeria

Author

Listed:
  • Olufemi Muibi Saibu

    (Department of Economics, University of Lagos, Lagos, Nigeria.)

  • Abiodun Murithadoh Musbaudeen

    (Department of Economics, University of Lagos, Lagos, Nigeria.)

Abstract

This paper examined whether monetary policy is acyclical, procyclical or countercyclical and the implications of the interaction of such cyclicality with industrial output on real economic growth in Nigeria. After determining the time series properties of the variables and based on conventional cyclicality measures, the fully modified ordinary least square method was used to examine the impact of monetary policy cyclicality and industry output on economic growth. Granger Causality test was used to examine the causal relationship between the monetary cyclicality and output growth. The results showed that monetary policy is countercyclical on economic growth in Nigeria. Monetary policy cyclicality had significant impact on economic growth and the causality test also indicated that monetary policy has a direct effect and indirect effect through industrial output growth on real economic growth in Nigeria. The findings are consistent with similar studies in other countries, and the policy implication of the results is that despite the recent doubt, monetary policy is still a potent stabilization policy that can be used to stimulate industrial-output growth and counter the recent downturn in real economic activities in Nigeria.

Suggested Citation

  • Olufemi Muibi Saibu & Abiodun Murithadoh Musbaudeen, 2018. "Monetary Policy Cyclicality, Industrial Output and Economic Growth Interactions in Nigeria," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 22(2), pages 457-470, Spring.
    • Handle: RePEc:eut:journl:v:22:y:2018:i:2:p:457
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    References listed on IDEAS

    as
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    3. Philippe Aghion & David Hemous & Enisse Kharroubi, 2009. "Credit Constraints, Cyclical Fiscal Policy and Industry Growth," NBER Working Papers 15119, National Bureau of Economic Research, Inc.
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    5. 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.
    6. 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.
    7. Philippe Aghion & Enisse Kharroubi, 2013. "Cyclical macroeconomic policy, financial regulation and economic growth," BIS Working Papers 434, Bank for International Settlements.
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