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Central Bank Communication and Monetary Policy Effectiveness: Empirical Evidence from Nigeria

Author

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  • Ekor, Maxwell
  • Adeniyi, Oluwatosin
  • Saka, Jimoh

Abstract

The study examines the impact of central bank communication on monetary policy in Nigeria by applying the standard deviation measure of volatility and the vector autoregressive approach. The findings show that inflation and markets volatilities reduced during the period of improved central bank communication. The money market responded positively to central bank communication and reverted faster to equilibrium compared with the stock market which responded negatively and reverted slower to equilibrium. Central bank communication is also able to explain some variation in the money and stock markets. The policy implications of the findings include the need for the Central Bank of Nigeria to continue to improve on its communications strategy as this has helped reduce inflation and markets volatility. In addition, the interest rate channel of the transmission mechanism should be accorded greater priority compared to the asset channel as the money market reverted faster to equilibrium compared to the stock market in the event of a shock

Suggested Citation

  • Ekor, Maxwell & Adeniyi, Oluwatosin & Saka, Jimoh, 2013. "Central Bank Communication and Monetary Policy Effectiveness: Empirical Evidence from Nigeria," MPRA Paper 82630, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:82630
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    File URL: https://mpra.ub.uni-muenchen.de/82630/1/MPRA_paper_82630.pdf
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    References listed on IDEAS

    as
    1. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    2. Fratzscher, Marcel, 2008. "Communication and exchange rate policy," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1651-1672, December.
    3. Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
    4. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    5. repec:pri:cepsud:161blinder is not listed on IDEAS
    6. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    7. Alex Cukierman, 2002. "Are contemporary central banks transparent about economic models and objectives and what difference does it make?," Review, Federal Reserve Bank of St. Louis, vol. 84(Jul), pages 15-36.
    8. Selva Demiralp & Oscar Jorda, "undated". "The Pavlovian Response of Term Rates to Fed Announcements," Department of Economics 99-06, California Davis - Department of Economics.
    9. Guthrie, Graeme & Wright, Julian, 2000. "Open mouth operations," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 489-516, October.
    10. Petra Gerlach‐Kristen, 2004. "Is the MPC's Voting Record Informative about Future UK Monetary Policy?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 299-313, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Omotosho, Babatunde S. & Tumala, Mohammed M., 2019. "A Text Mining Analysis of Central Bank Monetary Policy Communication in Nigeria," MPRA Paper 98850, University Library of Munich, Germany.
    2. Omotosho, Babatunde S., 2020. "Central Bank Communication during Economic Recessions: Evidence from Nigeria," MPRA Paper 99655, University Library of Munich, Germany.

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    More about this item

    Keywords

    Central bank communication; Impulse response; Variance decomposition;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G1 - Financial Economics - - General Financial Markets

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