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Estimating asymmetries in monetary policy reaction function: an oil price augmented Taylor type rule for Nigeria under unconventional regime


  • Patricks Ogiji

    (Central Bank of Nigeria)

  • Tersoo Shimonkabir Shitile

    (Central Bank of Nigeria
    Nile University of Nigeria
    International Monetary Fund)

  • Nuruddeen Usman

    (Central Bank of Nigeria)


Domestic monetary conditions are often cited as a driver of monetary stimulus. This paper estimates an oil price augmented forward-looking reaction function for Nigeria’s unconventional monetary policy. It investigates its short-run and long-run asymmetric sensitivity with respect to the expected inflation, output gap, and oil price using data over the period 1995Q1 to 2021Q2. The results suggest that the Central Bank of Nigeria has an asymmetric reaction function and largely reflects oil price shock when taking decisions on the use of unconventional measures (credit easing policy). This finding confirmed the preference and reaction function of the monetary policy toward assessing the current stance and the future direction of monetary policy. Policy implications for these findings are also examined.

Suggested Citation

  • Patricks Ogiji & Tersoo Shimonkabir Shitile & Nuruddeen Usman, 2022. "Estimating asymmetries in monetary policy reaction function: an oil price augmented Taylor type rule for Nigeria under unconventional regime," Economic Change and Restructuring, Springer, vol. 55(3), pages 1655-1672, August.
  • Handle: RePEc:kap:ecopln:v:55:y:2022:i:3:d:10.1007_s10644-021-09362-4
    DOI: 10.1007/s10644-021-09362-4

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    More about this item


    Unconventional monetary policy reaction function; Credit easing; Oil price; Inflation; Output gap; Nonlinear models;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy


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