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Monetary Policy and Financial Stability in the Nigerian Banking Industry

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  • Oparah Felix Chukwudi
  • James Tumba Henry

Abstract

This study examined the impact of monetary policy on financial stability in the Nigerian banking industry for the period 2008Q1 to 2016Q2, using an error correction model. Banking industry financial stability index (BIFSI) was computed within the study and was used as a measure of financial stability in the Nigerian banking industry. The study discovered that the impact of monetary policy on financial stability in the Nigerian banking industry was weak. It also revealed a significant long run equilibrium relationship between monetary policy and financial stability in the Nigerian banking industry with a speed of adjustment to long run equilibrium of 66.54%. It was concluded that open market operation and exchange rate channels are more effective channels of transmitting monetary policy to financial stability in the banking industry, than interest rate channel.

Suggested Citation

  • Oparah Felix Chukwudi & James Tumba Henry, 2020. "Monetary Policy and Financial Stability in the Nigerian Banking Industry," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(1), pages 82-114, January.
    • Handle: RePEc:jfr:ijfr11:v:11:y:2020:i:1:p:82-114
    DOI: 10.5430/ijfr.v11n1p82
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