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Asymmetric Effect of Monetary Policy Shocks on Output and Prices in Nigeria

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  • Olayiwola, Abiodun Sunday
  • Ogun, T.P.

Abstract

This study investigated the asymmetric effect of positive and negative monetary policy shocks on output and prices in Nigeria using interest rate shocks. This was with the view to ascertaining the impact of monetary policy on sustainable output growth and price stability in Nigeria from 1986 to 2016. Quarterly secondary data from 1986: Q1 to 2016:Q4 on output (GDP), interest rate, money supply, inflation rate, investment and real effective exchange rate were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin, 2016 and World Development Indicator (WDI), 2018. Data collected were analyzed using Non-linear Autoregressive Distributive Lag (NARDL) econometric techniques. The results showed that in the short run, negative shocks have more significant effects (2.7%) on output than positive shocks (1.2%) but the effects of positive and negative monetary policy shocks do not have significant effects on price level; while in the long run, positive shocks have more significant effects than the negative shocks on both output (3.1% and 1.9%) and prices (-51.1%and 45.1%). The study concluded that monetary policy shocks have asymmetric effects on output and prices in Nigeria both in the short and long run period.

Suggested Citation

  • Olayiwola, Abiodun Sunday & Ogun, T.P., 2019. "Asymmetric Effect of Monetary Policy Shocks on Output and Prices in Nigeria," African Journal of Economic Review, African Journal of Economic Review, vol. 7(1), January.
    • Handle: RePEc:ags:afjecr:285009
    DOI: 10.22004/ag.econ.285009
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    Cited by:

    1. Serdar Ongan, Ismet Gocer, Ayse Ongan, 2022. "Revisiting the quantity theory of money in Euro Area: the case of Greece," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 19(1), pages 63-77, June.
    2. Johnbosco Chukwuma Ozigbu, 2023. "Responsiveness of Headline Inflation to the Dynamics of Monetary Aggregates in Nigeria: A Structural Vector Autoregressive (SVAR) Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(9), pages 1701-1711, September.
    3. Serdar Ongan, Ismet Gocer, Ayse Ongan, 2022. "Revisiting the quantity theory of money in Euro Area: the case of Greece," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 19(1), pages 63-77, June.

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