IDEAS home Printed from https://ideas.repec.org/a/beo/journl/v68y2023i236p81-103.html
   My bibliography  Save this article

Monetary Policy And Economic Growth In Nigeria: Evidence From Bounds And Bayer-Hanck Cointegration Techniques

Author

Listed:
  • Kingsley Imandojemu
  • Bosede Ngozi Adeleye
  • Babatunde Aina

Abstract

This paper contributes to the monetary policy-economic growth debate by investigating whether monetary policy stimulates economic growth in Nigeria. Using time series data from 1970 to 2018 and deploying the autoregressive distributed lag (ARDL) model, bounds and the BayerHanck (2013) cointegration tests, evidence from the main and robustness checks show that (1) a significant long-run association exists, and (2) a percentage increase in the monetary policy rate results in 0.055 percentage decline in economic growth, on average, ceteris paribus. In other words, these findings confirm that a statistically significant inverse relation exists between monetary policy and economic growth in Nigeria. Trade openness also exerts asymmetric contemporaneous (0.094) and lag (-0.059) impacts on economic growth at the 1% and 5% significance levels, respectively. Similarly, the inflation rate contemporaneously reduces economic growth (-0.002) at the 1% significance level while its lag impacts are asymmetric and s atistically significant at the 10% and 5% levels, respectively. Policy recommendations are discussed.

Suggested Citation

  • Kingsley Imandojemu & Bosede Ngozi Adeleye & Babatunde Aina, 2023. "Monetary Policy And Economic Growth In Nigeria: Evidence From Bounds And Bayer-Hanck Cointegration Techniques," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 68(236), pages 81-103, January –.
    • Handle: RePEc:beo:journl:v:68:y:2023:i:236:p:81-103
    as

    Download full text from publisher

    File URL: http://www.ekof.bg.ac.rs/wp-content/uploads/2015/12/236-04.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chang, Roberto & Kaltani, Linda & Loayza, Norman V., 2009. "Openness can be good for growth: The role of policy complementarities," Journal of Development Economics, Elsevier, vol. 90(1), pages 33-49, September.
    2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. Bosede Ngozi Adeleye, 2020. "Unbundling interest rate and bank credit nexus on income inequality: structural break analysis from Nigeria," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 29(1), pages 63-78, July.
    4. Anindya Banerjee & Juan Dolado & Ricardo Mestre, 1998. "Error‐correction Mechanism Tests for Cointegration in a Single‐equation Framework," Journal of Time Series Analysis, Wiley Blackwell, vol. 19(3), pages 267-283, May.
    5. Christian Bayer & Christoph Hanck, 2013. "Combining non-cointegration tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 34(1), pages 83-95, January.
    6. De Gregorio, Jose & Guidotti, Pablo E., 1995. "Financial development and economic growth," World Development, Elsevier, vol. 23(3), pages 433-448, March.
    7. Fry, Maxwell J., 1980. "Saving, investment, growth and the cost of financial repression," World Development, Elsevier, vol. 8(4), pages 317-327, April.
    8. Ngozi Adeleye & Evans Osabuohien & Ebenezer Bowale & Oluwatoyin Matthew & Emmanuel Oduntan, 2018. "Financial reforms and credit growth in Nigeria: empirical insights from ARDL and ECM techniques," International Review of Applied Economics, Taylor & Francis Journals, vol. 32(6), pages 807-820, November.
    9. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    10. Boswijk, H. Peter, 1995. "Efficient inference on cointegration parameters in structural error correction models," Journal of Econometrics, Elsevier, vol. 69(1), pages 133-158, September.
    11. Roubini, Nouriel & Sala-i-Martin, Xavier, 1992. "Financial repression and economic growth," Journal of Development Economics, Elsevier, vol. 39(1), pages 5-30, July.
    12. Michael Baghebo & Ebibai Tombra Stephen, 2014. "Monetary Policy and Economic Growth in Nigeria (1980-2011)," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(1), pages 20-32.
    13. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    14. Michael Baghebo & Ebibai Tombra Stephen, 2014. "Monetary Policy and Economic Growth in Nigeria (1980-2011)," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(1), pages 20-32, January.
    15. Shobande Olatunji A., 2019. "Monetary Policy Spillovers Through Industrial Growth in Nigeria: A Time Series Analysis," Economics and Business, Sciendo, vol. 33(1), pages 94-110, January.
    16. UFOEZE, Lawrence Olisaemeka, 2018. "Effect Of Monetary Policy On Economic Growth In Nigeria: An Empirical Investigation," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 9(1), pages 123-140.
    17. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    18. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    19. Abille, Adamu Braimah & Mpuure, Desmond Mbe-Nyire, 2020. "Effect of Monetary Policy on Economic Growth in Ghana," Asian Journal of Applied Economics/ Applied Economics Journal, Kasetsart University, Faculty of Economics, Center for Applied Economic Research, vol. 27(2), pages 110-124, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Okoro, Emmanuel E. & Adeleye, Bosede N. & Okoye, Lawrence U. & Maxwell, Omeje, 2021. "Gas flaring, ineffective utilization of energy resource and associated economic impact in Nigeria: Evidence from ARDL and Bayer-Hanck cointegration techniques," Energy Policy, Elsevier, vol. 153(C).
    2. Solomon P. Nathaniel & Festus V. Bekun, 2020. "Electricity Consumption, Urbanization and Economic Growth in Nigeria: New Insights from Combined Cointegration amidst Structural Breaks," Research Africa Network Working Papers 20/013, Research Africa Network (RAN).
    3. Mary Oluwatoyin Agboola, 2021. "Female Labour Force Participation in Saudi Arabia and its Determinants," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 135-152.
    4. Rasool Dehghanzadeh Shahabad & Mehmet Balcilar, 2022. "Modelling the Dynamic Interaction between Economic Policy Uncertainty and Commodity Prices in India: The Dynamic Autoregressive Distributed Lag Approach," Mathematics, MDPI, vol. 10(10), pages 1-21, May.
    5. Sohail Amjed & Iqtidar Ali Shah & Adnan Riaz, 2022. "Investigating the Interactive Role of Demand Side Factors Potentially Responsible for Energy Crisis in Pakistan," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 236-246, May.
    6. Terungwa Paul Joseph Jato, Ph.D & Joyce Mbakosun Ayaga, 2022. "External Economic Shocks and Monetary Policy Tools in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(7), pages 110-119, July.
    7. Avishek Khanal & Mohammad Mafizur Rahman & Rasheda Khanam & Eswaran Velayutham, 2021. "Are Tourism and Energy Consumption Linked? Evidence from Australia," Sustainability, MDPI, vol. 13(19), pages 1-20, September.
    8. repec:ipg:wpaper:2014-485 is not listed on IDEAS
    9. Magda Kandil & Muhammad Shahbaz & Mantu Kumar Mahalik & Duc Khuong Nguyen, 2017. "The drivers of economic growth in China and India: globalization or financial development?," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 16(1), pages 54-84, April.
    10. Muhammad Shahbaz & Ijaz Ur Rehman & Ahmed Taneem Muzaffar, 2015. "Re-Visiting Financial Development and Economic Growth Nexus: The Role of Capitalization in Bangladesh," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 452-471, September.
    11. Agboola, Mary Oluwatoyin, 2021. "Female Labour Force Participation in Saudi Arabia and its Determinants," Gospodarka Narodowa-The Polish Journal of Economics, Szkoła Główna Handlowa w Warszawie / SGH Warsaw School of Economics, vol. 2021(1), March.
    12. Md. Qamruzzaman, 2023. "Does Environmental Degradation-Led Remittances Flow? Nexus between Environmental Degradation, Uncertainty, Financial Inclusion and Remittances Inflows in India and China," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 9-26, March.
    13. Nathaniel Solomon Prince, 2021. "Natural Resources, Urbanisation, Economic Growth and the Ecological Footprint in South Africa: The Moderating Role of Human Capital," Quaestiones Geographicae, Sciendo, vol. 40(2), pages 63-76, June.
    14. Balsalobre-Lorente, Daniel & Bekun, Festus Victor & Etokakpan, Mfonobong Udom & Driha, Oana M., 2019. "A road to enhancements in natural gas use in Iran: A multivariate modelling approach," Resources Policy, Elsevier, vol. 64(C).
    15. Solomon Prince Nathaniel & Festus Bekun & Alimshan Faizulayev, 2021. "Modelling the Impact of Energy Consumption, Natural Resources, and Urbanization on Ecological Footprint in South Africa: Assessing the Moderating Role of Human Capital," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 130-139.
    16. Shahbaz, Muhammad & Hoang, Thi Hong Van & Mahalik, Mantu Kumar & Roubaud, David, 2017. "Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis," Energy Economics, Elsevier, vol. 63(C), pages 199-212.
    17. Liu, Yaping & Sadiq, Farah & Ali, Wajahat & Kumail, Tafazal, 2022. "Does tourism development, energy consumption, trade openness and economic growth matters for ecological footprint: Testing the Environmental Kuznets Curve and pollution haven hypothesis for Pakistan," Energy, Elsevier, vol. 245(C).
    18. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    19. Francisco Rodríguez, 2006. "Openness and Growth: What Have We Learned?," Wesleyan Economics Working Papers 2006-011, Wesleyan University, Department of Economics.
    20. Muhammad Shahbaz & Hrushikesh Mallick & Mantu Kumar Mahalik & Shawkat Hammoudeh, 2018. "Is globalization detrimental to financial development? Further evidence from a very large emerging economy with significant orientation towards policies," Applied Economics, Taylor & Francis Journals, vol. 50(6), pages 574-595, February.
    21. Mary O. Agboola & Festus V. Bekun, 2019. "Does Agricultural Value Added Induce Environmental Degradation? Empirical Evidence from an Agrarian Country," CEREDEC Working Papers 19/040, Centre de Recherche pour le Développement Economique (CEREDEC).

    More about this item

    Keywords

    monetary policy; economic growth; interest rate.;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:beo:journl:v:68:y:2023:i:236:p:81-103. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Goran Petrić (email available below). General contact details of provider: https://edirc.repec.org/data/efbeoyu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.