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On the stability of the money multiplier in Nigeria: Co-integration analyses with regime shifts in banking system liquidity

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  • K. Moses Tule
  • O. Taiwo Ajilore

Abstract

The study hypothesized the existence of regime shifts in the conduct of monetary policy, occasioned by changing liquidity conditions in the domestic banking system in Nigeria. Within the context of this prognosis, the study tests the stability of the money multiplier, utilizing methodological procedures that allow for the explicit consideration of regime shift bias in the specification of the model and the empirical estimation. The study found the existence of a stable long run relationship between broad money and the monetary base, confirming that the necessary condition for monetary control within a multiplier frame work is satisfied for Nigeria. Also, the spate of quantitative easing by the Central Bank of Nigeria to ameliorate adverse liquidity conditions and the lingering effects of the global financial crises occasioned a structural break in monetary policy, determined endogenously to have occurred in November 2009.

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  • K. Moses Tule & O. Taiwo Ajilore, 2016. "On the stability of the money multiplier in Nigeria: Co-integration analyses with regime shifts in banking system liquidity," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1187780-118, December.
    • Handle: RePEc:taf:oaefxx:v:4:y:2016:i:1:p:1187780
    DOI: 10.1080/23322039.2016.1187780
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    Cited by:

    1. Ismet Gocer & Serdar Ongar, 2020. "Re-Examining the Stability of Money Multiplier for the US: The Nonlinear ARDL Model," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 18(1), pages 101-113.
    2. Mark Ofoi & Parmendra Sharma, 2021. "Does the Money Multiplier Hold in Pacific Island Countries? The Case of Papua New Guinea," JRFM, MDPI, vol. 14(9), pages 1-21, September.

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