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Monetary Policy and Manufacturing Capacity Utilization: Further Evidence from Nigeria

Author

Listed:
  • Sunday Osahon Igbinedion

    (University of Benin, Nigeria)

  • Frank Iyekoretin Ogbeide

    (University of Benin, Nigeria)

Abstract

This study investigates the nexus between monetary policy and manufacturing capacity utilization in Nigeria for the 1980-2014 period, using an error-correction modelling approach. The results reveal that both current and past values of ­lending rate adversely affect manufacturing performance, but ­manufacturing responds positively to the current period's banking credit, confirming that policy to enhance access to funds can stimulate investment in manufacturing sub-sector in Nigeria. Real exchange rate shows mixed performance; the current exchange rate has a negative but insignificant effect, whereas the impact of the one-period lagged value was positive and significant at 5%. Broad money supply positively and significantly influences manufacturing. The error-correction term is significant and correctly signed. Further, the variance decomposition shows shock in monetary policy phenomena, explainsrelatively significant variations in manufacturing performance. This study recommends that monetary authorities should implement policies in line with the structure of the economy to enhance contribution of manufacturing sector to overall economic growth. Effort should be made to enhance the flow of credit to the economy, while adopting effective exchange rate management in a stable macroeconomic environment to boost industrial production.

Suggested Citation

  • Sunday Osahon Igbinedion & Frank Iyekoretin Ogbeide, 2016. "Monetary Policy and Manufacturing Capacity Utilization: Further Evidence from Nigeria," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 14(2), pages 159-174.
    • Handle: RePEc:seb:journl:v:14:y:2016:i:2:p:159-174
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    References listed on IDEAS

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    Cited by:

    1. Justin .C. Alugbuo & Ekwugha Juliet Chika, 2020. "Monetary Policy and Stock Market Performance: Evidence from Nigeria Stock Exchange Market," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 4(6), pages 556-568, June.

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    More about this item

    Keywords

    Monetary Policy; Capacity Utilization; Nigeria;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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