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Does Monetary Policy Influence Economic Growth in Nigeria?

  • Ismail O. FASANYA

    ()

    (Department of Economics, University of Ibadan, Ibadan, Nigeria)

  • Adegbemi B.O ONAKOYA

    ()

    (Department of Economics, Tai Solarin University of Education, Ijagun, Nigeria)

  • Mariam A. AGBOLUAJE

    ()

    (Department of Economics and Financial Studies, Fountain University, Osogbo, Osun State, Nigeria)

This study examines the impact of monetary policy on economic growth in Nigeria.The study uses time-series data covering the range of 1975 to 2010.The effects of stochastic shocks of each of the endogenous variables are explored using Error Correction Model (ECM). The study shows that Long run relationship exists among the variables. Also, the core finding of this study shows that inflation rate, exchange rate and external reserve are significant monetary policy instruments that drive growth in Nigeria .It is therefore recommended that the establishment of primary and secondary government bond markets that can also increase the efficiency of monetary policy and reduce the government’s need to rely on the central bank for direct financing.

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Article provided by Asian Economic and Social Society in its journal Asian Economic and Financial Review.

Volume (Year): 3 (2013)
Issue (Month): 5 (May)
Pages: 635-646

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Handle: RePEc:asi:aeafrj:2013:p:635-646
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  1. Starr, Martha A., 2005. "Does money matter in the CIS? Effects of monetary policy on output and prices," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 441-461, September.
  2. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
  3. Georgy Ganev & Krisztina Molnar & Krzysztof Rybinski & Przemyslaw Wozniak, 2002. "Transmission Mechanism of Monetary Policy in Centraland Eastern Europe," CASE Network Reports 0052, CASE-Center for Social and Economic Research.
  4. McCallum, John, 1991. "Credit Rationing and the Monetary Transmission Mechanism," American Economic Review, American Economic Association, vol. 81(4), pages 946-51, September.
  5. Rafiq, M.S. & Mallick, S.K., 2008. "The effect of monetary policy on output in EMU3: A sign restriction approach," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1756-1791, December.
  6. John H. Cochrane, 1995. "What do the VARs Mean?: Measuring the Output Effects of Monetary Policy," NBER Working Papers 5154, National Bureau of Economic Research, Inc.
  7. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  8. James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers 1996_07, York University, Department of Economics.
  9. Kahn, Michael & Kandel, Shmuel & Sarig, Oded, 2002. "Real and nominal effects of central bank monetary policy," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1493-1519, November.
  10. Zhang, Wenlang, 2009. "China's monetary policy: Quantity versus price rules," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 473-484, September.
  11. Feridun, M., & Folawewo, A. O. & Osinubi, T.S ., 2005. "Monetary Policy and Macroeconomic Instability in Nigeria: A Rational Expectation Approach," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(2).
  12. Balogun, Emmanuel Dele, 2007. "Monetary policy and economic performance of West African Monetary Zone Countries," MPRA Paper 4308, University Library of Munich, Germany.
  13. Sylvanus I. Ikhide & Abayomi A. Alawode, 2001. "Financial Sector Reforms, Macroeconomic Instability and the Order of Economic Liberalization: The Evidence from Nigeria," Research Papers RP_112, African Economic Research Consortium.
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