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Evaluating the Effect of Monetary Policy on Current Account in Nigeria

Author

Listed:
  • Ephraim UGWU

    (Department of Economics, Faculty of social sciences, Federal University, Oye-Ekiti, Ekiti State, Nigeria.)

  • Sunday KEJI

    (Department of Economics, Faculty of social sciences, Federal University, Oye-Ekiti, Ekiti State, Nigeria.)

  • Oluwabusola OLAOSEBIKAN

    (Department of Economics, Faculty of social sciences, Federal University, Oye-Ekiti, Ekiti State, Nigeria.)

  • Christopher EHINOMEN

    (Department of Economics, Faculty of social sciences, Federal University, Oye-Ekiti, Ekiti State, Nigeria.)

Abstract

Despite several empirical investigations on the interaction effect between monetary policy transmissions and the current account balances of countries, evidences have been inconclusive. This study examines the monetary policy transmission effect on current account in Nigeria from 1970 to 2021. Employing the vector error correction model (VECM) procedures, the results of the stationarity test indicate that all the variables are first differenced I(1) at 5% significance level in Augmented Dicky Fuller test procedure. The cointegration test results showed that there are three cointegrating equations at 5% significance level. The long-run results showed that coefficient of interest rate (INTR) indicated a negative sign to the current account of Nigeria and it is statistically significant. The short-run result shows that 2.2% of the disequilibrium in the effect monetary policy on current account of Nigeria is corrected annually. The impulse response function results showed that response of current account to the global monetary policy variable, (USINTR) increased immediately and continued significantly with positive sign in the long run the result showed that response to INTR and rate of exchange (EXCH) declined immediately and continued to decline along the horizon to a negative shock in both the short and long-runs. Therefore, importation of industrial materials should be encouraged to increase the country’s export volume.

Suggested Citation

  • Ephraim UGWU & Sunday KEJI & Oluwabusola OLAOSEBIKAN & Christopher EHINOMEN, 2025. "Evaluating the Effect of Monetary Policy on Current Account in Nigeria," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 10(2), pages 71-84, September.
    • Handle: RePEc:ora:jrojbe:v:10:y:2025:i:2:p:71-84
    DOI: http://doi.org/10.47535/1991ojbe218
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    Keywords

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    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania

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