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Monetary Policy Shocks and Effectiveness of Channels of Transmission in Nigeria: A Dynamic Stochastic General Equilibrium Approach

Author

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  • Akinlo Anthony Enisan
  • Apanisile Olumuyiwa Tolulope

Abstract

This study examines the effect of anticipated and unanticipated monetary policy shocks on the effectiveness of monetary policy transmission mechanism in Nigeria by estimating a sticky-price dynamic stochastic general equilibrium (DSGE) model using Bayesian estimation approach. Four major transmission channels (exchange rate, interest rate, credit and expectation) are considered due to the economic and financial conditions of Nigeria. The study employs quarterly data from 1986:1 to 2013:4 and data are sourced from World Development Indicator (online version). Results show that unanticipated monetary policy shock has short-run impact on monetary policy transmission channels, while anticipated monetary policy shock has long-run impact on the monetary policy transmission channels. The study, therefore, concluded that efforts should be directed at reducing the unanticipated monetary policy by announcing government policy at the beginning of the year so as to reduce people’s expectation.

Suggested Citation

  • Akinlo Anthony Enisan & Apanisile Olumuyiwa Tolulope, 2019. "Monetary Policy Shocks and Effectiveness of Channels of Transmission in Nigeria: A Dynamic Stochastic General Equilibrium Approach," Global Business Review, International Management Institute, vol. 20(2), pages 331-353, April.
    • Handle: RePEc:sae:globus:v:20:y:2019:i:2:p:331-353
    DOI: 10.1177/0972150918825194
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    Cited by:

    1. Apanisile, Olumuyiwa Tolulope, 2021. "Monetary Policy Shocks and Income Inequality in Nigeria: Do Effects of Anticipated and Unanticipated Shocks Differ?," African Journal of Economic Review, African Journal of Economic Review, vol. 9(2), April.
    2. Olumuyiwa Tolulope Apanisile, 2021. "Remittances, financial development and the effectiveness of monetary policy transmission mechanism in Nigeria: a DSGE approach (1986–2018)," Indian Economic Review, Springer, vol. 56(1), pages 91-112, June.

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