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Effect Of Monetary Policy On Economic Growth In Nigeria: An Empirical Investigation

Author

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  • UFOEZE, Lawrence Olisaemeka

    (Department of Banking and Finance, Chukwuemeka Odumegwu Ojukwu University, Anambra State)

Abstract

The study investigated the effect of monetary policy on economic growth in Nigeria. The natural log of the GDP was used as the dependent variables against the explanatory monetary policy variables: monetary policy rate, money supply, exchange rate, lending rate and investment. The time series data is the market-controlled period covering 1986 to 2016. The study adopted an Ordinary Least Squared technique and also conducted the unit root and co-integration tests. The study showed that long run relationship exists among the variables. In addition, the core finding of this study showed that monetary policy rate, interest rate, and investment have insignificant positive effect on economic growth in Nigeria. Money supply however has significant positive effect on growth in Nigeria. Exchange rate has significant negative effect on GDP in Nigeria. Money supply and investment granger cause economic growth, while economic growth causes interest rate in Nigeria. On the overall, monetary policy explains 98% of the changes in economic growth in Nigeria. Thus, the study concluded that monetary policy can be effectively used to control Nigerian economy and thus a veritable tool for price stability and improve output

Suggested Citation

  • UFOEZE, Lawrence Olisaemeka, 2018. "Effect Of Monetary Policy On Economic Growth In Nigeria: An Empirical Investigation," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 9(1), pages 123-140.
    • Handle: RePEc:ris:sphecs:0281
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    Citations

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    Cited by:

    1. Mrutyunjaya SAHOO & Praveen SAHU, 2023. "Does the effectiveness of money supply and foreign direct investment determine the industrial growth performance in India?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(635), S), pages 83-102, Summer.
    2. Alade Raji OLAJIDE & Adegboyega Abdul Rasheed AFOLABI & Abiodun Osinuga TITILAYO, 2022. "Effects of Monetary Policy on Financial Inclusion: An Empirical Evidence from Nigeria," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 74-80.
    3. Ajibola, Joseph Olusegun & Oladejo, Titilope Idowu & Adedapo, Kolawoledaud & Agunbiade, Kolawole Adeyemi, 2024. "The Role of Private Investment and the Relationship between 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. 8(5), pages 655-672, May.
    4. Bosede Olanike Awoyemi & Mark Achukwu & Simon Asala & Oluwole Aiyegbusi & Tajudeen Abiodun Onikate-Amosu, 2024. "Building Resilience for Transformational Recovery: An Analysis of Monetary Policy and Economic Growth in West Africa before and Following the COVID-19 Periods," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 111-122, July.
    5. Abille, Adamu Braimah & Mpuure, Desmond Mbe-Nyire, 2020. "Effect of Monetary Policy on Economic Growth in Ghana," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 27(2).
    6. Yimka S. A. Alalade & Ezekiel Oseni & Olusegun A. Adekunle, 2020. "Monetary Policy and Financial Performance of Deposit Money Banks in Nigeria," Asian Social Science, Canadian Center of Science and Education, vol. 16(11), pages 123-123, November.
    7. Moses K. Tule & Oloruntoba S. Ogundele & Martins O. Apinran, 2018. "Efficacy of Monetary Policy Instruments on Economic Growth: Evidence from Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(10), pages 1239-1256, October.
    8. Terungwa Paul Joseph Jato, Ph.D & Joyce Mbakosun Ayaga, 2022. "External Economic Shocks and Monetary Policy Tools in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(7), pages 110-119, July.
    9. Samson Edo & Oluwatoyin Matthew & Ifeoluwa Ogunrinola, 2022. "Foreign Development Assistance and Macroeconomic Policy Stance: The Underlying Levers of Growth in Emerging SSA Countries," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 20(4 (Winter), pages 353-374.
    10. Kingsley Imandojemu & Bosede Ngozi Adeleye & Babatunde Aina, 2023. "Monetary Policy And Economic Growth In Nigeria: Evidence From Bounds And Bayer-Hanck Cointegration Techniques," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 68(236), pages 81-103, January –.
    11. Musa, Nuhu, 2020. "Impact of Exchange Rate Volatility on Inflation in Nigeria," Journal of Contemporary Research in Business, Economics and Finance, Michael Laurence, vol. 3(1), pages 26-38.

    More about this item

    Keywords

    monetary policy; monetary policy rate; money supply; exchange rate; lending rate; investment; Nigeria;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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