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Interest rate liberalisation and economic growth in Nigeria: evidence based on the ARDL-bounds testing approach

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  • Erasmus L. Owusu
  • Nicholas M. Odhiambo

Abstract

This paper examines the relationship between interest rate liberalisation policies and sustainable economic growth in Nigeria. Employing the autoregressive-distributed lag (ARDL) - bounds testing approach and using GDP per capita as economic growth indicator, the paper establishes a long run relationship between economic growth and interest rate liberalisation, which is represented by an index calculated using principal component analysis (PCA). The empirical findings of this paper show that interest rate liberalisation policies have a positive impact on economic growth in Nigeria. These results apply irrespective of whether the test is conducted in the short run or in the long run. This supports the numerous past studies, which have reported positive results regarding the effects of interest rate liberalisation on economic growth. The paper, therefore, concludes that interest rate liberalisation policies have been very effective in bolstering economic growth in Nigeria.

Suggested Citation

  • Erasmus L. Owusu & Nicholas M. Odhiambo, 2014. "Interest rate liberalisation and economic growth in Nigeria: evidence based on the ARDL-bounds testing approach," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 6(2), pages 130-141.
    • Handle: RePEc:ids:ijsuse:v:6:y:2014:i:2:p:130-141
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    Citations

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    Cited by:

    1. Oludele Emmanuel Folarin, 2019. "Financial reforms and industrialisation: evidence from Nigeria," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(1), pages 166-189, June.
    2. Tajudeen, Egbetunda & Taofeek Olusola, Ayinde & AbdulGaniy Ademola, Balogun, 2017. "Interest Rate Liberalization, Financial Development and Economic Growth in subSaharan African Economies," African Journal of Economic Review, African Journal of Economic Review, vol. 5(2), July.
    3. Pradhan, Rudra P., 2019. "Investigating the causal relationship between transportation infrastructure, financial penetration and economic growth in G-20 countries," Research in Transportation Economics, Elsevier, vol. 78(C).
    4. Okowa, Ezaal & Vincent, Moses Owede, 2022. "Bank Competition, Concentration and Economic Growth: A Panel Analysis of Selected Banks in the Nigeria Banking Industry," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 9(2), pages 73-83, February.
    5. Shabnam Sazma Bano, 2018. "The Dynamic Relationship between Real Interest Rate and Investment: An Empirical Analysis for Selected Pacific Island Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 8(5), pages 131-141.
    6. Erasmus L Owusu, 2016. "Stock Market and Sustainable Economic Growth in Nigeria," Economies, MDPI, vol. 4(4), pages 1-13, November.
    7. Uduakobong Inyang & Ezema Clifford Anene & Aniekan Etim Bassey & Emediong Iniobong Aaron, 2023. "Risk to Economic Growth in Nigeria: Focus on Money Market Instruments," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(2), pages 244-253, February.

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