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Financial Development and the Velocity of Money in Nigeria: An Empirical Analysis

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Abstract

The paper investigates the impact of financial development on the velocity of money in Nigeria, over the time horizon 1986:1 — 2010:4. The paper confirms the existence of a unique and statistically significant relationship between velocity of money (narrow and broad) and measures of financial development. The error-correction results show that current exchange rate has statistically significant negative effect on velocity of money in Nigeria. Per capita income has statistically significant relation with velocity of money (narrow and broad), which clearly supports the quantity theory. The results show that money issuing authorities cannot obtain additional leverage by issuing more money without generating high inflationary pressure. The results also show the importance of financial sector innovations for velocity.

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  • A.E.Akinlo, 2012. "Financial Development and the Velocity of Money in Nigeria: An Empirical Analysis," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 4(2), pages 097-113, December.
    • Handle: RePEc:rfb:journl:v:04:y:2012:i:2:p:097-113
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    3. Ms. Sharmina Khanom, 2019. "Economic Transformation in Bangladesh and the Income Velocity of Broad Money: An Econometric Analysis," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 5(2), pages 408-417, 02-2019.
    4. Elwasila Saeed Elamin Mohamed, 2020. "Velocity of Money Income and Economic Growth in Sudan: Cointegration and Error Correction Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 10(2), pages 87-98.
    5. Yu Zhang & Mostafa Chegeni & Claudio Tessone, 2024. "Velocity, Holding Time and Lifespan of Cryptocurrency in Transactions," Papers 2406.16587, arXiv.org.
    6. Susan Sunila Sharma & Ferry Syarifuddin, 2019. "Determinants Of Indonesia’S Income Velocity Of Money," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(3), pages 323-342, January.
    7. John Bosco Nnyanzi, 2018. "The Interaction Effect of Financial Innovation and the Transmission Channels on Money Demand in Uganda," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(12), pages 1-1, December.
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    9. Dorothy Nampewo & Jacob Opolot, 2016. "Financial Innovations and Money Velocity in Uganda," African Development Review, African Development Bank, vol. 28(4), pages 371-382, December.

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