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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.

Suggested Citation

  • 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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    Cited by:

    1. Lydia Ndirangu & Esman Morekwa Nyamongo, 2015. "Financial Innovations and Their Implications for Monetary Policy in Kenya," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 24(suppl_1), pages 46-71.
    2. 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.
    3. 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.
    4. 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 1-20, January.

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