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Open Market Operations and Macroeconomic Stability in Nigeria: An Application of Co-Integration and Error Correction Modeling

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  • Shehu Usman Rano, Aliyu

Abstract

This paper seeks to empirically assess the impact of indirect tool of monetary control on macroeconomic stability in the Nigerian economy. Four key areas were modeled using a static model. Results from both static and dynamic models were presented and the latter model yields more consistent and significant coefficients. Further, the error correction term in the four models was significant and correctly signed. The paper established case for macroeconomic stability through effective conduct of OMO operations in the long run. It supports the recapitalization measure of the CBN aimed at strengthening the financial system and better performance of the economy.

Suggested Citation

  • Shehu Usman Rano, Aliyu, 2005. "Open Market Operations and Macroeconomic Stability in Nigeria: An Application of Co-Integration and Error Correction Modeling," MPRA Paper 46685, University Library of Munich, Germany, revised 03 Nov 2006.
    • Handle: RePEc:pra:mprapa:46685
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    References listed on IDEAS

    as
    1. 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.
    2. Laidler, David, 1978. "Money and money income: An essay on the `transmission mechanism'," Journal of Monetary Economics, Elsevier, vol. 4(2), pages 151-191, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Open market operations; macroeconomic stability; co-integration; error correction;
    All these keywords.

    JEL classification:

    • 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

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