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International Capital Flows And Monetary Policy Reaction In Nigeria - Are There Asymmetric Effects?

Author

Listed:
  • Audu Isa

    (Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria.)

  • Adeleke Adegoke Ibrahim

    (Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria.)

  • Adedeji Kayode Ezekiel

    (Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria.)

Abstract

This paper examines the monetary policy response to fluctuations in international capital flows to Nigeria. This study improves on previous studies by employing the recent asymmetric ARDL approach to examine whether capital flow fluctuations have symmetric or asymmetric effects on monetary policy reaction in both the short- and long-run for the period 2000Q1-2018Q4. The estimated results revealed that positive and negative components of capital flows as well as other explanatory variables have statistically significant effects on the behaviour of monetary policy both in the short- and longrun. The implication of the results is that different monetary sterilization index is required for managing the inherent pressure that can emanate from asymmetric capital flows. Hence, this may explain the continuous adjustment of monetary policy in order to attract foreign capital flows, facilitate stable prices and exchange rate as well as accretion to foreign reserves.

Suggested Citation

  • Audu Isa & Adeleke Adegoke Ibrahim & Adedeji Kayode Ezekiel, 2020. "International Capital Flows And Monetary Policy Reaction In Nigeria - Are There Asymmetric Effects?," West African Journal of Monetary and Economic Integration, West African Monetary Institute, vol. 20(1a), pages 22-43, June.
    • Handle: RePEc:wam:journl:v:20:y:2020:i:1a:p:22-43
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    More about this item

    Keywords

    International Capital Flows; Monetary Policy; NARDL; Nigeria;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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