The Impact of Monetary Policy on Economic Growth and Price Stability in Kenya...iosrjce
The government of Kenya’s economic blueprint dubbed ‘Kenya Vision 2030’ acknowledges the
importance of maintaining a stable macro-economic environment. Despite Kenya implementing monetary
policy aimed at achieving stable prices and fostering economic growth, the economy has been reporting low
economic growth and high rates of inflation. These implies there is still a point of disconnect between what
Central bank of Kenya Pursues and the outcome of the objectives. In this study, structural vector autoregresion
(SVAR) model is estimatedto trace the effects of monetary policy shocks on economic growth and prices in
Kenya. Three alternative monetary policy instruments were put into use i.e. broad money supply (M3), interbank
lending rate (ILR) and the real effective exchange rate (REER). The study found evidence that monetary policy
innovations carried out on the quantity-based nominal anchor (M3) has modest effects on economic growth and
prices with a very fast speed of adjustment. Innovations on the price-based nominal anchors (ILR and REER)
have relative and fleeting effects on real GDP. The study recommended that Central Bank of Kenya should
place more emphasis on the use of the quantity-based nominal anchor rather than the price-based nominal
anchor
Using a series of econometric techniques, the study analysed interaction between monetary policy and private sector credit in Ghana. This study made use of monthly dataset spanning January 1999 to December 2019 of credit to the private sector (PSC) and broad money supply (M2). The results reveal that there exists cointegration, a long run stationary relation between monetary policy and private sector credit. This implies, increases in credit should prompt long-term increases in monetary policy. It is not surprising that growth in the private sector might have a stronger effect on monetary policy. The Error Correction Test is statistically significant and that all the variables demonstrate similar adjustment speeds. This implies that in the short run, both money supply and credit are somewhat equally responsive to their last period’s equilibrium error. There is unidirectional causation from private sector credit to monetary policy. It can be said that, there is an interaction between money supply and private sector credit. Thus, credit to private sector holds great potential in promoting economic growth. It can be recommended to the government to increase the credit flow to the private sector because of its strategic importance in creating and generating growth of the economy.
Adopting Inflation Targeting for Monetary Policy: Practical Issues for Nigeriaiosrjce
IOSR Journal of Humanities and Social Science is a double blind peer reviewed International Journal edited by International Organization of Scientific Research (IOSR).The Journal provides a common forum where all aspects of humanities and social sciences are presented. IOSR-JHSS publishes original papers, review papers, conceptual framework, analytical and simulation models, case studies, empirical research, technical notes etc.
EFFECTIVE MONETARY POLICY AS A RECIPE FOR MACROECONOMIC STABILITY IN NIGERIApaperpublications3
Abstract: The basic objective of this paper was to investigate effective monetary policy as a recipe for macroeconomic stability in Nigeria, using annual time series data from 1981 to 2014. The paper employs OLS methodology with all the BLUE assumption. The results show that considering the magnitude, 1% increase in RGDP (proxy for economic growth) is brought about by 0.86% increase in narrow money supply (M1), 0.63% increase in broad money supply (M2), 258% decrease in inflation rate (INFLARATE), 1276.3% increase in lending rate (LEDRATE), and 143.9% increase in gross fixed capital formation. This implies that an increase in lending rate and other related variables will lead to a significant increase in real GDP, proxy for economic growth in Nigeria. The estimated value of R2 (goodness of fit) of 0.67 or 67% shows that 67% systematic variation in Real GDP is caused by variation in narrow money supply, broad money supply, inflation rate, lending rate, and gross fixed capital formation. This indicates that indeed, monetary policy has an effect on macroeconomic stability in Nigeria. The study seems to suggest that concerted efforts should be made by the government to focus on increment in narrow and broad money supplies which will aid in the financing of the country’s monetary growth, balancing the price increase, stimulating increased spending, and further enhancing the country’s macroeconomic variables.
T. Dergiades, C. Milas, T. Panagioditis
IHU, Greece, University of Liverpool, UK , University of Macedonia, Greece, LSE, UK and RCEA, Italy.
November 2015. Open Seminar at Eesti Pank
This paper analysed the forecasting ability of yield-curve as a predictor of the short-run fluctuations in economic activities in Namibia. The study employed the techniques of unit root, cointegration, impulse response functions and forecast error variance decomposition on the quarterly data covering the period 1996 to 2015. The results revealed a negative relationship between the term structure of interest rates and economic activities, though statistically insignificant. This suggests that the yield-curve has no forecasting ability as a predictor of economic activity in Namibia.
Empirical Analysis of Fiscal Dominance and the Conduct of Monetary Policy in ...AJHSSR Journal
The study empirically investigates fiscal dominance and the conduct of monetary policy in
Nigeria, using quarterly data from 1986Q1 to 2016Q4. It adopts the vector error correction mechanism (VECM)
and cointegration technique to analyze the data and make inference. The findings reveal that there is no
evidence of fiscal dominance in Nigeria. The empirical results show that budget deficit, domestic debt and
money supply have no significant influence on the average price level. However, budget deficit and domestic
debt are shown to have significant influence on money supply, but only in the short-run. The policy implication
is that the government should enforce fiscal discipline through the appropriate institution and the Central Bank
should be given autonomy to perform the primary function of long-term price stability, among other functions.
Inflation targeting in Emerging Market Economies Sarthak Luthra
The presentation represents inflation targeting in EMEs, with a focus on various exchange rate regimes in Asian countries and their susceptibility to financial crisis.
IMPACT OF FISCAL POLICY AND MONETARY POLICY ON THE ECONOMIC GROWTH OF NIGERIA...AJHSSR Journal
ABSTRACT: This research work focused on the impact of fiscal and monetary policy on Nigeria‟s economic
growth between 1980 and 2016. In the study, variables such as government expenditure and taxation revenue
were used to proxy fiscal policy while the broad money supply was employed as a proxy for monetary policy.
The other variable employed as controlled variable is interest rate. The unit root test confirmed that all the
variables were not stationary at levels but were stationary at first difference. Also, the Johansen cointegration
test confirmed that a long run relationship exists between fiscal policy, monetary policy and economic growth in
Nigeria. The empirical results reported using the ordinary least squares technique suggested that fiscal policy
has positive and significant impact on economic growth, and monetary policy has positive impact on economic
growth as well. We, therefore, conclude that both fiscal and monetary policies have positive and significant
impact on Nigeria‟s economic growth between 1980 and 2016. To this end, we recommend that the Federal
Government of Nigeria should focus on using the fiscal policy instruments to stimulate the economy in the
desired direction in order to sustain economic growth process. We also call on the Central Bank of Nigeria to
consistently embark on appropriate and effective monetary policy to boost the economy. Furthermore, since
interest rate is observed to negatively impact economic growth, efforts should be made as lowering the cost of
borrowing in the commercial banks and other financial institutions in order to boost investment and increase
economic growth in the country.
American Research Journal of Humanities & Social Science (ARJHSS) is a double blind peer reviewed, open access journal published by (ARJHSS).
The main objective of ARJHSS is to provide an intellectual platform for the international scholars. ARJHSS aims to promote interdisciplinary studies in Humanities & Social Science and become the leading journal in Humanities & Social Science in the world.
The Impact of Monetary Policy on Economic Growth and Price Stability in Kenya...iosrjce
The government of Kenya’s economic blueprint dubbed ‘Kenya Vision 2030’ acknowledges the
importance of maintaining a stable macro-economic environment. Despite Kenya implementing monetary
policy aimed at achieving stable prices and fostering economic growth, the economy has been reporting low
economic growth and high rates of inflation. These implies there is still a point of disconnect between what
Central bank of Kenya Pursues and the outcome of the objectives. In this study, structural vector autoregresion
(SVAR) model is estimatedto trace the effects of monetary policy shocks on economic growth and prices in
Kenya. Three alternative monetary policy instruments were put into use i.e. broad money supply (M3), interbank
lending rate (ILR) and the real effective exchange rate (REER). The study found evidence that monetary policy
innovations carried out on the quantity-based nominal anchor (M3) has modest effects on economic growth and
prices with a very fast speed of adjustment. Innovations on the price-based nominal anchors (ILR and REER)
have relative and fleeting effects on real GDP. The study recommended that Central Bank of Kenya should
place more emphasis on the use of the quantity-based nominal anchor rather than the price-based nominal
anchor
Using a series of econometric techniques, the study analysed interaction between monetary policy and private sector credit in Ghana. This study made use of monthly dataset spanning January 1999 to December 2019 of credit to the private sector (PSC) and broad money supply (M2). The results reveal that there exists cointegration, a long run stationary relation between monetary policy and private sector credit. This implies, increases in credit should prompt long-term increases in monetary policy. It is not surprising that growth in the private sector might have a stronger effect on monetary policy. The Error Correction Test is statistically significant and that all the variables demonstrate similar adjustment speeds. This implies that in the short run, both money supply and credit are somewhat equally responsive to their last period’s equilibrium error. There is unidirectional causation from private sector credit to monetary policy. It can be said that, there is an interaction between money supply and private sector credit. Thus, credit to private sector holds great potential in promoting economic growth. It can be recommended to the government to increase the credit flow to the private sector because of its strategic importance in creating and generating growth of the economy.
Adopting Inflation Targeting for Monetary Policy: Practical Issues for Nigeriaiosrjce
IOSR Journal of Humanities and Social Science is a double blind peer reviewed International Journal edited by International Organization of Scientific Research (IOSR).The Journal provides a common forum where all aspects of humanities and social sciences are presented. IOSR-JHSS publishes original papers, review papers, conceptual framework, analytical and simulation models, case studies, empirical research, technical notes etc.
EFFECTIVE MONETARY POLICY AS A RECIPE FOR MACROECONOMIC STABILITY IN NIGERIApaperpublications3
Abstract: The basic objective of this paper was to investigate effective monetary policy as a recipe for macroeconomic stability in Nigeria, using annual time series data from 1981 to 2014. The paper employs OLS methodology with all the BLUE assumption. The results show that considering the magnitude, 1% increase in RGDP (proxy for economic growth) is brought about by 0.86% increase in narrow money supply (M1), 0.63% increase in broad money supply (M2), 258% decrease in inflation rate (INFLARATE), 1276.3% increase in lending rate (LEDRATE), and 143.9% increase in gross fixed capital formation. This implies that an increase in lending rate and other related variables will lead to a significant increase in real GDP, proxy for economic growth in Nigeria. The estimated value of R2 (goodness of fit) of 0.67 or 67% shows that 67% systematic variation in Real GDP is caused by variation in narrow money supply, broad money supply, inflation rate, lending rate, and gross fixed capital formation. This indicates that indeed, monetary policy has an effect on macroeconomic stability in Nigeria. The study seems to suggest that concerted efforts should be made by the government to focus on increment in narrow and broad money supplies which will aid in the financing of the country’s monetary growth, balancing the price increase, stimulating increased spending, and further enhancing the country’s macroeconomic variables.
T. Dergiades, C. Milas, T. Panagioditis
IHU, Greece, University of Liverpool, UK , University of Macedonia, Greece, LSE, UK and RCEA, Italy.
November 2015. Open Seminar at Eesti Pank
This paper analysed the forecasting ability of yield-curve as a predictor of the short-run fluctuations in economic activities in Namibia. The study employed the techniques of unit root, cointegration, impulse response functions and forecast error variance decomposition on the quarterly data covering the period 1996 to 2015. The results revealed a negative relationship between the term structure of interest rates and economic activities, though statistically insignificant. This suggests that the yield-curve has no forecasting ability as a predictor of economic activity in Namibia.
Empirical Analysis of Fiscal Dominance and the Conduct of Monetary Policy in ...AJHSSR Journal
The study empirically investigates fiscal dominance and the conduct of monetary policy in
Nigeria, using quarterly data from 1986Q1 to 2016Q4. It adopts the vector error correction mechanism (VECM)
and cointegration technique to analyze the data and make inference. The findings reveal that there is no
evidence of fiscal dominance in Nigeria. The empirical results show that budget deficit, domestic debt and
money supply have no significant influence on the average price level. However, budget deficit and domestic
debt are shown to have significant influence on money supply, but only in the short-run. The policy implication
is that the government should enforce fiscal discipline through the appropriate institution and the Central Bank
should be given autonomy to perform the primary function of long-term price stability, among other functions.
Inflation targeting in Emerging Market Economies Sarthak Luthra
The presentation represents inflation targeting in EMEs, with a focus on various exchange rate regimes in Asian countries and their susceptibility to financial crisis.
IMPACT OF FISCAL POLICY AND MONETARY POLICY ON THE ECONOMIC GROWTH OF NIGERIA...AJHSSR Journal
ABSTRACT: This research work focused on the impact of fiscal and monetary policy on Nigeria‟s economic
growth between 1980 and 2016. In the study, variables such as government expenditure and taxation revenue
were used to proxy fiscal policy while the broad money supply was employed as a proxy for monetary policy.
The other variable employed as controlled variable is interest rate. The unit root test confirmed that all the
variables were not stationary at levels but were stationary at first difference. Also, the Johansen cointegration
test confirmed that a long run relationship exists between fiscal policy, monetary policy and economic growth in
Nigeria. The empirical results reported using the ordinary least squares technique suggested that fiscal policy
has positive and significant impact on economic growth, and monetary policy has positive impact on economic
growth as well. We, therefore, conclude that both fiscal and monetary policies have positive and significant
impact on Nigeria‟s economic growth between 1980 and 2016. To this end, we recommend that the Federal
Government of Nigeria should focus on using the fiscal policy instruments to stimulate the economy in the
desired direction in order to sustain economic growth process. We also call on the Central Bank of Nigeria to
consistently embark on appropriate and effective monetary policy to boost the economy. Furthermore, since
interest rate is observed to negatively impact economic growth, efforts should be made as lowering the cost of
borrowing in the commercial banks and other financial institutions in order to boost investment and increase
economic growth in the country.
American Research Journal of Humanities & Social Science (ARJHSS) is a double blind peer reviewed, open access journal published by (ARJHSS).
The main objective of ARJHSS is to provide an intellectual platform for the international scholars. ARJHSS aims to promote interdisciplinary studies in Humanities & Social Science and become the leading journal in Humanities & Social Science in the world.
Macroeconomic stability in the DRC: highlighting the role of exchange rate an...IJRTEMJOURNAL
This study is part of a macroeconomic approach and seeks to identify the role of the rate of
economic growth and the exchange rate in controlling the macroeconomic framework. The approaches adopted
in this paper are part of Keynesian thinking on macroeconomic stability using the macroeconomic stability
index proposed by Burnside and Dollars (2004) and A. Amine (2005). Our results argue that economic growth
is causing macroeconomic stability and that the exchange rate is negatively and significantly accounting for
macroeconomic stability in the Democratic Republic of Congo.
Effect of Government Policies on Price Stability in Nigeriaijtsrd
This study examined the effect of monetary and fiscal policies on price stability in Nigeria using a data rich framework spanning from 1986 2020. The main problem with the macro economic policies that prompted this study was the fact that despite the series of the CBN Monetary Policy Committee decisions and government tax and expenditure implementation there is apparently no useful effect on inflation price . The study employed Auto regression Distributed Lag ARDL Bound Test for Co integration of data analysis depending upon the time series properties of the data that confer mixed order of integration in addition to the conduct of the unit root test and Error Correction Model ECM estimation. The ADF test revealed that LNCPI, EXR, GSDMD, GEXP, GTX and M2 were stationary at 1 1 while RIR, MPR and BOP at 1 0 . Pesaran, Shin and Smith 2001 established that the ARDL bounds technique allows a mixture of 1 1 and 1 0 variables as regressors. Hence, we proceed to perform the ARDL bounds test for integration. The results of the ARDL bounds revealed that the null hypotheses were all rejected implying that a long run effect exists among monetary and fiscal policies variables and CPI in a multivariate framework. ECM coefficient of 0.2942 conforms with expectation. Durbin Watson statistic 0f 1 9925 revealed that the model seems not to have any case of autocorrelation. The result of our analysis shows that fiscal policy rather than monetary policy exerts a more potent effect on price stability in Nigeria. The study recommends that both monetary and fiscal policies should be complementary in order to be effective in taming inflation in Nigeria. Onehi, Damian Haruna | Ibenta, Steve Nkem | Adigwe, Patrick, K. | Emejulu, Ikenna Justin "Effect of Government Policies on Price Stability in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-7 | Issue-1 , February 2023, URL: https://www.ijtsrd.com/papers/ijtsrd52766.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/52766/effect-of-government-policies-on-price-stability-in-nigeria/onehi-damian-haruna
Monetary Policy Variables and Agricultural Development in NigeriaAJHSSR Journal
ABSTRACT : The goal of any country's monetary policy is to maximize economic production ; thus, the
monetary authorities of that country use monetary policy variables to regulate the money supply, interest rates,
and other aspects of the money market. From 1999-2017, when the Central Bank of Nigeria (CBN) employed a
wide range of monetary policy variables to stimulate the economy, this study employs the multiple regression
technique to examine the relationship between agricultural output, government spending, money supply, and
inflation rate in Nigeria. This research found that financial policy measures can be used to affect agriculture,
which would have a positive knock-on effect on agricultural development and, ultimately, Nigeria's economic
growth and development. Both tools of monetary policy have the potential to promote agricultural growth with
the right policies in place.
KEYWORDS : Agricultural Output, Government Spending, Inflation Rateand Money Supply.
Dynamic Impact of Money Supply on Inflation: Evidence from ECOWAS Member Statesiosrjce
According to the monetarists, inflation is essentially a monetary phenomenon in the sense that a
continuous rise in the general price level is due to the rate of expansion in money supply far in excess of the
money actually demanded by economic units. But the link between changes in money supply and inflation is not
instantaneous. This study, therefore, assessed this dynamic linkage between money supply and inflation in
ECOWAS member states; West African Monetary Zone (WAMZ) and West African Economic Monetary Union
(WAEMU) for the period 1980-2012. The stationary properties of the series are explored both at univariate and
panel sense using KPSS and ADF; IPS and LLC. The results revealed that money supply and inflation are
stationary at the level for individual countries and at panel sense. The random effect model for ECOWAS
member states shows that the impact of money supply on inflation is effective in the current and first period.
While the impact is effective in the first period for WAMZ, WAEMU experiences the impact in current period.
The finding also reveals that there are significant specific-country effects on the variables. This implies that the
objective of macroeconomic convergence is yet to be achieved. The paper, therefore recommends that inflation
should be used as an operational guide in evaluating the effectiveness of monetary policy and also a strong
monetary cooperation programme among ECOWAS member states should be evolved.
Financial Development and Economic Growth Nexus in Nigeriaiosrjce
The study assessed the impact of financial development on economic growth in Nigeria using time
series data from 1970 to 2012. The Autoregressive Distributed Lag bounds testing approach to cointegration
was utilized for this study. The result from the ARDL model indicate that the variables for this study are
cointegrated while the error correction term appeared significant and confirms that short-run disequilibria are
corrected up to about 50 percent annually. The empirical results reveals that financial development exerts
positive and significant impact on economic growth in the long-run while trade liberalization variables exert
negative impact on economic growth in the long-run indicating non-competitive nature of non-oil domestic
products in the international market. In the short-run, domestic credit is insignificant which indicates a dearth
of investible funds in the economy. There is evidence that financial development policies influence economic
growth in the long-run and not in the short-run. This study among others recommends the urgent need to
implement policies that will strengthen the deposit mobilization and intermediation efforts in the banking system
in other to deepen the financial system. Nigerian trade performance should be improved through economic
diversification and further availability of funds to private sector at competitive interest rate in order to produce
internationally competitive products.
The Nigerian Government both previous and present has introduced several policies and programmes to reduce or proffer remedial measures to militate against the negative impact of high inflationary levels on the Nigerian economy. All these measures have not led to a productive result as the inflation rate has continued to sour higher over the years. This paper aimed at examining the economic influence of the determinant factors that influence inflationary trends that are multi-dimensional and dynamic which continue to defy solutions. The data used for this work was sourced from the National Bureau of Statistics and Central Bank of Nigeria, from 1983 to 2020. The ordinary least square approach was used to analyze the data and the result shows that consumer’s price index, interest rate and total export has a positive effect on Nigeria inflation, but only the Consumer’s Price Index (CPI) have a statistically significant effect on the Nigeria inflation at 99% confidence interval. Result also shows that the exchange rate, foreign reserve, money supply, real GDP, real income and total imports has a negative effect though not statistically significant on the Nigeria inflation rate. The result of the granger causality test shows exchange rate and total imports to granger cause Nigeria inflation. It is recommended that Government should improve locally manufacture products to meet international demands to reduce total imports.
Effect of Monetary Policy on Economic Growth in Nigeriaijtsrd
"The chequered history of the Nigeria monetary policy has created a visible asymmetry in the two known monetary regimes before and after SAP in the country. Years after the Structural Adjustment Programme SAP , the Nigeria economy grew to become the strongest economy in Africa and suddenly plunging into recession, a situation that have adversely affected the growth and development of the economy by ways of rising unemployment rate, soaring poverty and swollen external debt, thus suggesting that the failure of the monetary policy in curbing price instability has caused growth instability as Nigeria's record of growth and development has become very poor. This study therefore examines the effect of monetary policy on economic growth in Nigeria using secondary data covering the period of 1980 2017 that were sourced from the Central Bank of Nigeria statistical bulletin. The model's estimates were estimated via multiple econometric model of the ordinary least square to ascertain the effect of money supply, credit in the economy, interest rate on credit, infrastructure, inflationary rate, external debts, price index on growth in Nigeria. The results show that money supply, interest rate on credit, infrastructure and external debt were statistically significant in explaining its impacts on economic growth while other variables used in the study were all found to be statistically insignificant in explaining the growth rate of the Nigerian economy. The study recommends among others that for effective operation of the monetary policy measures in the Nigerian economy, the Central Bank of Nigeria should be granted full autonomy on its monetary policy functions. Partial autonomy should be replaced with full autonomy for the central banks in the developing economies at large which is invariably subjected to government interference and its politics. Onwuteaka, Ifeoma Cecilia | Okoye, P. V. C | Molokwu, Ifeoma Mirian ""Effect of Monetary Policy on Economic Growth in Nigeria"" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-3 , April 2019, URL: https://www.ijtsrd.com/papers/ijtsrd22984.pdf
Paper URL: https://www.ijtsrd.com/humanities-and-the-arts/economics/22984/effect-of-monetary-policy-on-economic-growth-in-nigeria/onwuteaka-ifeoma-cecilia"
Developing economies are different than developed economies in many aspects, i.e., in terms of institutional framework and political situation etc. Thus, the monetary policy needed in developing countries is also different than developed countries. The goal of this study is to investigate exchange rate channel of monetary transmission mechanism in a developing country’s setup. The variables included in our analysis are interest rate, exchange rate, exports, consumer price index and gross domestic product. Johansen cointegration technique is applied to analyze the long run relationship among variables while multivariate VECM granger causality test is used to explore the direction of causality among the set of our variables. We use annual data ranging from 1980 to 2015 while taking account of the limitations of time series data. Our findings suggest that output has a negative long run relationship with exchange rate and interest rate, positive relationship with exports and no statistically significant relationship with inflation. Interest rate granger causes all four of our variables thus showing the power of this policy tool. Exchange rate causes exports, consumer price index and output which means exchange rate is the second most powerful variable in our analysis. Output is granger caused by interest rate, exports and exchange rate which confirms the sensitivity of output to these variables. Consumer price index is granger caused by all four of our variables and came out to be the most sensitive variable in our analysis.
Internal and External Balance with Expenditure changing and switching policie...iosrjce
This paper studies macroeconomic effects of internal and external balance with Expenditure
changing and switching policies about Bangladesh. Expenditure switching policies are measures that shift
expenditure between the domestic and external sectors, typically by increasing exports and decreasing imports
of goods and services. Exchange rate adjustment is often combined with monetary and fiscal tightening as part
of a comprehensive adjustment program featuring both expenditure-changing and expenditures witching
measures. This paper shows the relation on exchange rate between government expenditure and money supply.
If fiscal expansion--either government expenditure increase or tax cuts--raises output, but worsens current
account balances. Conversely, fiscal contraction improves current account balances, but lowers output. In this
paper we also see that when money supply increases that time there create dual effect country faces inflation on
the other hand currency devaluated as a result export increase
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Buy Verified PayPal Account | Buy Google 5 Star Reviewsusawebmarket
Buy Verified PayPal Account
Looking to buy verified PayPal accounts? Discover 7 expert tips for safely purchasing a verified PayPal account in 2024. Ensure security and reliability for your transactions.
PayPal Services Features-
🟢 Email Access
🟢 Bank Added
🟢 Card Verified
🟢 Full SSN Provided
🟢 Phone Number Access
🟢 Driving License Copy
🟢 Fasted Delivery
Client Satisfaction is Our First priority. Our services is very appropriate to buy. We assume that the first-rate way to purchase our offerings is to order on the website. If you have any worry in our cooperation usually You can order us on Skype or Telegram.
24/7 Hours Reply/Please Contact
usawebmarketEmail: support@usawebmarket.com
Skype: usawebmarket
Telegram: @usawebmarket
WhatsApp: +1(218) 203-5951
USA WEB MARKET is the Best Verified PayPal, Payoneer, Cash App, Skrill, Neteller, Stripe Account and SEO, SMM Service provider.100%Satisfection granted.100% replacement Granted.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s DholeraAvirahi City Dholera
The Tata Group, a titan of Indian industry, is making waves with its advanced talks with Taiwanese chipmakers Powerchip Semiconductor Manufacturing Corporation (PSMC) and UMC Group. The goal? Establishing a cutting-edge semiconductor fabrication unit (fab) in Dholera, Gujarat. This isn’t just any project; it’s a potential game changer for India’s chipmaking aspirations and a boon for investors seeking promising residential projects in dholera sir.
Visit : https://www.avirahi.com/blog/tata-group-dials-taiwan-for-its-chipmaking-ambition-in-gujarats-dholera/
Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s Dholera
Dynamics of monetary policy and output nexus in nigeria
1. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
22
Dynamics of Monetary Policy and Output Nexus in Nigeria
ADESOYE, A. Bolaji (PhD)
Department of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun state, Nigeria
E-Mail: boladesoye@yahoo.com
Abstract
This paper critically examines the dynamic interaction between monetary policy tools in stimulating economic
growth, as well as stabilizing the economy from external shocks in Nigeria. The paper considered key monetary
time series variables and real growth of output in formulating Vector Autoregressive (VAR) models which
showed interdependence interaction between the period of 1970 and 2007. The time series properties of the
selected variables are examined using the Augmented Dickey-Fuller unit root test and the results revealed that
only growth of real output and broad money supply are stationary at levels, while saving, lending and exchange
rates were found stationary at first difference. The long-run dynamic interaction was established through the
Johansen’s Trace and Maximum Eigenvalue tests. The pair-wise Granger-Causality test conducted showed that
the growth rate of real output is not a leading indicator for any monetary variables. Other innovation accounting
tests were also carried out like impulse responses function to test for the response of growth in real output to
innovation shock on monetary variables. Also, the forecast error variance decomposition (FEVD) is used to
decompose the monetary shock on the growth rate of real output in Nigeria. Proper policy recommendations
were proffered based on the results emanated from the econometric analyses.
Keywords: Monetary policy, Monetary Instruments, Economic growth, VAR, Impulse shock response, Variance
decomposition
Is Monetary Policy a Growth Stimulant in Nigeria? A Vector Autoregressive Approach
Section 1.
Introduction
Monetary policy is the process by which the central bank or monetary authority of a country controls
the supply of money, availability of money, and cost of money or rate of interest to attain a set of objectives
oriented towards the growth and stability of the economy (Wikipedia, 2010). Monetary policy on the other hand,
refers to the specific actions taken by the Central Bank to regulate the value, supply and cost of money in the
economy with a view to achieving Government’s macroeconomic objectives. For many countries, the objectives
of monetary policy are explicitly stated in the laws establishing the central bank, while for others they are not
(CBN, 2006).
Monetary policy is usually used to attain a set of objectives oriented towards the growth and stability of
the economy. The objectives of monetary policy may vary from country to country but there are two main views.
The first view calls for monetary policy to achieve price stability, while the second view seeks to achieve price
stability and other macroeconomic objectives. The macroeconomic objectives include full employment of scare
resources, economic growth, and balance of payment equilibrium. The Central Bank of Nigeria, like other
central banks in developing countries, achieves the monetary policy goal through the amount of money supplied.
Monetary policy focuses on the relationship between the rates of interest in an economy, that is the
price at which money can be borrowed, and the total supply of money. Monetary policy uses a variety of
instruments to control one or both of these, to influence outcomes like economic growth, inflation, exchange
rates with other currencies and unemployment. Where currency is under a monopoly of issuance, or where there
is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority
has the ability to alter the money supply and thus influence the interest rate (to achieve policy goals). The
beginning of monetary policy as such comes from the late 19th century, where it was used to maintain the gold
standard. A policy is referred to as contractionary if it reduces the size of the money supply or raises the interest
rate. An expansionary policy increases the size of the money supply, or decreases the interest rate. Furthermore,
monetary policies are described as follows: accommodative, if the interest rate set by the central monetary
authority is intended to create economic growth; neutral, if it is intended neither to create growth nor combat
inflation; or tight if intended to reduce inflation.
On the basis of the significance of monetary policy tools in stabilizing the entire economy, this study
aim to examine and analyse the dynamic interaction of monetary policy tools in stimulating economic growth, as
well as stabilizing the economy from external shocks in Nigeria. The paper is organized as follows. Section 2
reviews previous literature on the interaction of monetary policy instruments with economic growth, and also the
mechanism of stimulating the economy amidst shocks. Section 3 provides an overview of the Nigeria monetary
system from 1970 to 2007, and Section 4 describes the data and the methodology employed in the study. The
econometric evidence and implications of the findings are discussed in section 5 and later recommends and
conclude the study.
2. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
23
Section 2.
2.0 Monetary Policy Mechanism and Economic Stability: Empirical Review
Generally, both fiscal and monetary policies seek at achieving relative macroeconomic stability. Over
the year, two issues have been subjects of debate in this regard. First is the superiority of each of these policies in
the achievement of macroeconomic stability. While the Keynesians argued that fiscal policy is more potent than
monetary policy, the monetarists led by Milton Friedman on the other hand believed the other way round.
Although the focus of this paper is neither to join in nor extend the debate, based on countries’ experience and
the fact that monetary policy is often free from political interference, the study analyses how monetary policy
can be employed to stabilize economic growth in Nigeria. The second issue concerns the definition of
macroeconomic instability.
Macroeconomic instability can be regarded as a situation of economic malaise, where the economy does
not seem to have settled in a steady equilibrium position (Akinlo, 2007; An and Sun, 2008), thereby making it
difficulty to make predictions and good planning. The definition of macroeconomic instability above suffers
from lack of precision. The monetary policy focuses precisely on the achievement of price stability, with respect
to both domestic and external prices. While inflation rate is often used to track movement in domestic price level,
exchange rate is used as policy tool in ensuring external stability and enhancing export performance (Caballero
and Corbo, 1989). In addition, exchange rate policy impacts on the outcome of stabilization measures and debt
management strategies (Busari, Omoke, and Adesoye, 2005; Busari and Olayiwola, 1999), especially in
developing countries.
Thus, this study examines the dynamic interaction between monetary policy tools and economic growth
since a decade after independence to 2007 fiscal year. As a means of achieving this, a simple monetary model
with rational expectation that emphasizes the fiscal role of the real exchange rate is used. The fiscal role of real
exchange rate is particularly relevant to Nigeria since the bulk of government revenue is derived from foreign
exchange earnings. In the theoretical model, the links between high inflation and the joint volatility of the real
exchange rate and inflation rate, and some aspects of government’s fiscal and exchange rate policies are
illustrated in a rational expectation equilibrium framework. Consequently, inflation rate and the real exchange
rates are jointly determined by the equilibrium of the model. This is derived from the sunspot equilibria theory in
which Woodford (1986), Shigoka (1994) and Drugeon and Wignolle (1996) have demonstrated that
macroeconomic instability is related to multiple rational expectation equilibria.
However, several empirical studies have been carried out to investigate the dynamic nexus between
monetary policy and economic growth among which are An and Sun (2008), Bernanke (1986), Chete (1995),
Busari, Omoke and Adesoye (2005), Dale and Haldane (1993), Faust and Rafiq and Mallick (2008), Rogers
(2003), Mallick (2010), and Montiel (1991).Though, this paper considered another dynamic approach in
ascertains the mechanisms of interaction between monetary policy and economic growth in Nigeria using
detailed econometric shocks accounting techniques. Although, the overview of monetary policy management in
Nigeria is reviewed in the next section in order to give detail accounts of the several monetary reforms eras the
country has undergone over the years.
Section 3.
3.0 Overview of Monetary Policy Management in Nigeria
Monetary policy in the Nigerian context refers to the actions of the Central Bank of Nigeria to regulate
the money supply, so as to achieve the ultimate macroeconomic objectives of government. Several factors
influence the money supply, some of which are within the control of the central bank, while others are outside its
control. The specific objective and the focus of monetary policy may change from time to time, depending on the
level of economic development and economic fortunes of the country. The choice of instrument to use to achieve
what objective would depend on these and other circumstances. These are the issues confronting monetary
policy makers.
Over the years, the objectives of monetary policy have remained the attainment of internal and external
balance of payment. However, emphases on techniques/instruments to achieve those objectives have changed
over the years. There have been two major phases in the pursuit of monetary policy in Nigeria since the
inception of the Cental Bank of Nigeria, namely, before and after 1986 Structural Adjustment Programme (SAP).
The first phase (1959-1986) placed emphasis on direct monetary controls, while the second phase (1986-date)
relies on market mechanisms or market-based controls.
The era of direct controls was a remarkable period in monetary policy management in Nigeria, because
it coincided with several structural changes in the economy; including the shift in the economic base from
agriculture to petroleum, the execution of the civil war, the oil boom and crash of the 1970s and early 1980s
respectively and the introduction of the Structural Adjustment Programme (Chuku, 2009; Garba 1996). The
economic environment that guided monetary policy before 1986 was characterized by the dominance of the oil
sector, the expanding role of the public sector in the economy and over-dependence on the external sector. In
3. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
24
order to maintain price stability and a healthy balance of payments position, monetary management depended on
the use of direct monetary instruments such as credit ceilings, selective credit controls, administered interest and
exchange rates, as well as the prescription of cash reserve requirements and special deposits. During this period
CBN’s monetary policies focused on fixing and controlling interest rates and exchange rates, selective sectoral
credit allocation, manipulation of the discount rate and involving in moral suasion. Reviewing this period,
Omotor (2007) observes that monetary policy was ineffective particularly because the CBN lacked instrument
autonomy and goal determination, being heavily influenced by the political considerations conveyed through the
Ministry of Finance. The CBN (2010) also posited that the use of market-based instruments was not feasible at
that point because of the underdeveloped nature of the financial markets and the deliberate restraint on interest
rates. The most popular instrument of monetary policy was the issuance of credit rationing guidelines, which
primarily set the rates of change for the components and aggregate commercial bank loans and advances to the
private sector.
The Structural Adjustment Programme (SAP) was adopted in July, 1986 ushered in a new era of
monetary policy implementation with market-friendly techniques in Nigeria and against the crash in the
international oil market and the resultant deteriorating economic conditions in the country. It was designed to
achieve fiscal balance and balance of payments viability by altering and restructuring the production and
consumption patterns of the economy, eliminating price distortions, reducing the heavy dependence on crude oil
exports and consumer goods imports, enhancing the non-oil export base and achieving sustainable growth. The
capacity of the CBN to carry out monetary policy using market friendly techniques was letter reinforced by the
amendments made to the CBN Act in 1991 which specifically granted the CBN full instrument and goal
autonomy. In line with the general philosophy of economic management under SAP, monetary policy was aimed
at inducing the emergence of a market-oriented financial system for effective mobilization of financial savings
and efficient resource allocation. The main instrument of the market-based framework is the open market
operations. These operations are conducted wholly on Nigerian Treasury Bills (TBs) and Repurchase
Agreements (REPOs), and are being complimented with the use of reserve requirements, the Cash Reserve Ratio
(CRR) and the Liquidity Ratio (LR). These set of instruments are used to influence the quantity-based nominal
anchor (monetary aggregates) used for monetary programming. On the other hand, the Minimum Rediscount
Rate (MRR) is being used as the price-based nominal anchor to influence the direction of the cost of funds in the
economy. This rate has generally been kept within the range of 26 and 8 percent since 1986. As a companion to
the use of the MRR, the CBN latter introduced the Monetary Policy Rate (MPR) in 2006 which establishes an
interest rate corridor of plus or minus two percentage points of the prevailing MPR. Since 2007, this rate has
been held within the band of 10.25 and 6 percent.
Section 4.
4. Methodology
This paper employed the by Sim (1980, 1992) Vector Autoregressive (VAR) model in analyzing the dynamic
interaction between monetary policy variables and economic growth in Nigeria. Other tests like Johansen
multivariate cointegration test and Granger-causality test are employed to determine the long-run relationship
(hence, possibly causally related i.e. mechanism of interaction) between selected money market variables and
economic growth in Nigeria. The Augmented Dickey-Fuller (ADF) unit root test is used to examine the
properties of the time series variables and to determine the order of integration. Furthermore, the impulse
response and error variance decomposition analyses are used to examine the dynamic and mechanism of relation
among the variables as a result of innovation shock. The choice of the lag length of the time series variables are
based on the minimum Akaike and Schwarz Information Criterion.
4.1 VAR specified model
Vector Autoregressive model is employed in analyzing the dynamic interaction between monetary policy tools -
proxies as Lending rate (LR), Savings rate (SR), Exchange rate (EXR) and Growth rate of broad money supply
(GM2)-and economic growth (GRY) in Nigeria based on the structural model specified below:
t
k
i
iti
n
i
iti
m
i
iti
q
i
iti
p
i
itit uGRYGMEXRSRLRGRY 11
1
1
1
1
1
1
1
1
1
1 2 ++++++= ∑∑∑∑∑ =
−
=
−
=
−
=
−
=
− αψληφδ
t
k
i
iti
n
i
iti
m
i
iti
q
i
iti
p
i
itit uGRYGMEXRSRLRLR 22
1
2
1
2
1
2
1
2
1
2 2 ++++++= ∑∑∑∑∑ =
−
=
−
=
−
=
−
=
− αψληφδ
t
k
i
iti
n
i
iti
m
i
iti
q
i
iti
p
i
itit uGRYGMEXRSRLRSR 33
1
3
1
3
1
3
1
31
1
3 2 ++++++= ∑∑∑∑∑ =
−
=
−
=
−
=
−
=
− αψληφδ
4. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
25
t
k
i
iti
n
i
iti
m
i
iti
q
i
iti
p
i
itit uGRYGMEXRSRLREXR 44
1
4
1
4
1
4
1
4
1
4 2 ++++++= ∑∑∑∑∑ =
−
=
−
=
−
=
−
=
− αψληφδ
t
k
i
iti
n
i
iti
m
i
iti
q
i
iti
p
i
itit uGRYGMEXRSRLRGM 55
1
5
1
5
1
5
1
5
1
5 22 ++++++= ∑∑∑∑∑ =
−
=
−
=
−
=
−
=
− αψληφδ
Where ,,,,, ijijijijij ψληφδ and ijα are parameters to be estimated in each system of equations.
4.2 Johansen Multivariate Cointegration Test
This paper employed VAR-based cointegration test using the methodology developed in Johansen (1997). The
Johansen multivariate cointegration test is to investigate the long-run relationship of the monetary policy
variables and growth of real GDP as a system of interdependent equations. The relationships among the variables
are based on the following model:
Consider a VAR of order p
ttptptt BxyAyAy ε++++= −− ...11 (6)
Where ty is a k-vector of non-stationary I(1) variables, tx is a d-vector of deterministic variables, and tε is a
vector of innovations. We can rewrite this VAR as
t
p
i
ttitt Bxyyy ε++∆Γ+Π=∆ ∑
−
=
−−
1
1
11 (7)
Where ,
1
∑=
Ι−=Π
p
i
iA ∑+=
−=Γ
p
ij
ji A
1
Granger’s representation theorem asserts that if the coefficient matrix Π has reduced rank r < k, then there exist
k x r matrices α and β each with rank r such that βα ′=Π and tyβ′ is I(0). r is the number of
cointegrating relations (the cointegrating rank) and each column of β is the cointegrating vector, and α
represents the speed of adjustment parameters.
Johansen developed two likelihood ratio tests for testing the number of cointegration vectors (r): the trace and
the maximum Eigenvalue test. The trace statistics test the null hypothesis of r = 0 (i.e. no cointegration) against
the alternative that r > 0 (i.e. there is one or more cointegration vector). The maximum Eigenvalue statistics test
the null hypothesis that the number of cointegrating vectors is r against the alternative of r + 1 cointegrating
vectors.
4.3 Granger-causality Test
In order to examine whether there are lead-lag relationships between the monetary policy variables and real GDP,
we run the Granger-causality test. If the time series of a variable is non-stationary, I(1) and is not cointegrated,
the variable is converted into I(0) by first differencing and Granger-causality test can be applied as follows:
txt
k
i
ix
k
i
tixxt YXX ,1
1
,
1
1, εψρϑ +∆+∆+=∆ −
==
− ∑∑ , (8)
tyt
k
i
iy
k
i
tiyyt XYY ,1
1
,
1
1, εψρϑ +∆+∆+=∆ −
==
− ∑∑ , (9)
Where tX∆ and tY∆ the first difference of time series variable while the series is nonstationary. However, if a
variable is non-stationary and cointegration, the Granger-causality test will be run based on the following
equations:
txtxxt
k
i
ix
k
i
tixxt ECTYXX ,1,1
1
,
1
1, εϕψρϑ ++∆+∆+=∆ −−
==
− ∑∑ , (10)
tytyyt
k
i
iy
k
i
tiyyt ECTXYY ,1,1
1
,
1
1, εϕψρϑ ++∆+∆+=∆ −−
==
− ∑∑ , (11)
Where xϕ and yϕ are the parameters of the ECT term, measuring the error correction mechanism that drives
the tX and tY back to their long run equilibrium relationship and this translate the vector error-correction (VEC)
model. The null hypothesis for the equation (8) and (10) is 0:
1
, =∑=
k
i
ixoH ψ , suggesting that the lagged item
5. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
26
tY∆ do not belong to the regression. Conversely, the null hypothesis for the equations (9) and (11) is
0:
1
,0 =∑=
k
i
iyH ψ , that is the lagged term tX∆ do not belong to the regression. These hypotheses are tested
using F-test.
4.4 Innovation Accounting
Innovation accounting such as the impulse response function and forecast error variance decomposition (FEVD)
is used in analyzing the interrelationships among the variables chosen in the system of equation (1) to (5). The
impulse response functions are responses of all variables in the model to a one unit structural shock to one
variable in the model. The impulse responses are plotted on the Y-axis with the period from the initial shock on
the X-axis. Formally, each )(ijkφ is interpreted as the time specific derivatives of the VMA( ∞ ) function
(Enders,1995):
k
jk
jk
X
i
l∂
∂
=)(φ (12)
Equation (12) measures the change in the
th
j variable in period t resulting from a unit shock to the
th
k variable
in the present period.
The FEVD measures the proportion of movement in a sequence attributed to its own shock to distinguish it from
movements attributable to shocks to another variable (Ender, 1995). In the FEVD analysis, the proportion of Y
variance due to Z shock can be expressed as:
[ ]
2
2
12
2
12
2
12
2
)(
)1(.......)1()0(
m
m
y
z
σ
δδδσ −+++
(13)
One can see that as m period increases the
2
)(myσ also increases. Further, this variance can be separated into
two series: ty and tz series. Consequently, the error variance for y can be composed of ytl and ztl . If ytl
approaches unity it implies that ty series is independent of tz series. It can be said that ty is exogenous
relative to tz . On the other hand, if ytl approaches zero (indicates that ztl approaches unity) the ty is said to
be endogenous with respect to the tz (Ender, 1995).
Section 5.
Empirical Results and Implications
5.1. Unit Root Test Results
The Augmented Dickey-Fuller unit root test result is presented in table 2. The ADF results reveals that
the time series variables-growth rate of real GDP and money supply exhibit consistent trend over the period.
This implies that only the growth rate of real output and money supply in levels reject the null hypothesis of non-
stationary and they are taken to be integrated of order zero, I(0). The other incorporated time series variables,
lending rate, savings rate and exchange rate are found unstable and non-mean reverting. This implies that they
accept the null hypothesis of non-stationary in levels. But accept reject the null hypothesis at first difference and
this indicates that they are stationary at first difference. These results are consistent with previous literature that
found most monetary variables non-stationary and non-mean reverting.
For the essence of other subsequent tests, all the considered macroeconomic and monetary time series
variables are regarded to be stationary at first difference and integrated of order one i.e. I(1).
Table 2: Unit Root Test Results: Monetary and Macroeconomic Variables
Variable
ADF Tau Statistics Order of
IntegrationIntercept Trend
GRY -2.8684*** (5) -4.3202* (6) 0
GM2 -3.5680** (1) -3.5111***(1) 0
LR -6.8706* (1) -6.9065* (1) 1
SR -6.1218* (1) -6.4258* (1) 1
EXR -3.4625** (1) -3.6478** (1) 1
Notes: *Significant at 1% level, **Significant at 5% level, ***Significant at 10% level. The value in parenthesis
is the lag length based on the minimum Akaike and Schwarz Information Criteria.
6. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
27
5.2 VAR Diagnostic Test Results
Prior before the cointegration test, VAR diagnostic tests were carried out on the estimated VAR model.
In selecting the appropriate lag number, the VAR lag order selection criteria test was employed and lag of 3 is
selected for subsequent test based on the minimum Final Prediction Error (FPE) and Akaike information Criteria
(AIC). In examining the stability of the VAR model at lag 3, the AR roots test result reveals that the VAR
models for the endogenous variables-GRY, LR, SR, EXR and GM2- are stable because there modulus are less
than one and lies inside the unit circle.
Also, the VAR Lag Exclusion Wald test result indicates that all the endogenous variables are jointly
significant at lag 3.
5.3 Johansen Multivariate Cointegration Test Results
The Johansen’s Trace and Maximum Eigenvalue tests result is shown in table 3. According to Johansen
(1997), if restrictions are imposed on the deterministic components of the johansen’s multivariate model, five
possible models exist. In this study, the third (intercept only) and fourth (intercept and trend) models restriction
options are employed as it is programmed in E-Views 5.1., since Johansen (1997) posited that the other models
restriction options that are too restrictive or least restrictive are unlikely to occur in practice. At McKinnon-
Haug-Michelis 5% significance level of the Trace and Max Eigenvalue tests suggest that the incorporated
variables are cointegrated with r = 2 and r = 0 respectively for third variant model. While for the fourth model
the variables are cointegrated with r = 3 and r = 0 at 5% significance level of the Trace and Max Eigenvalue tests
respectively. Empirically, it is common for the estimated test statistics to show different result. However, in the
Max Eigenvalue test, both the null and alternative hypotheses are more specific. Therefore, the rank will be
dependent on the Max Eigenvalue test results, which implies that there at most none cointegration vector (r = 0)
in model 3 and 4.
Table 3: Unrestricted Cointegration Rank Test (Max. Eigen value and Trace Statistics)
R Max. Eigen Statistic Trace Statistic Max. Eigen Statistic Trace Statistic
R=0 50.3002* (33.8769) 104.563* (69.8189) 69.5331* (38.3310) 139.903* (88.8038)
R≤1 20.0508 (27.5843) 54.2623* (47.8561) 23.9816 (32.1183) 70.3696* (63.8761)
R≤2 19.4137 (21.1316) 31.2115* (29.7971) 19.5017 (25.8232) 46.3880* (42.9153)
R≤3 11.2411 (14.2646) 11.7979 (15.4947) 15.8207 (19.3870) 26.8863* (25.8721)
R≤4 0.5567 (3.84147) 0.55673 (3.84147) 11.0656 (12.5180) 11.0656 (12.5180)
*Denotes rejection of the hypothesis at the 0.05 level. The value in parenthesis represents the critical value at
0.05 level.
Source: Authors Computation (2011)
5.4 Pair-wise Granger-Causality Test Results
The pair-wise Granger-Causality test is conducted to examine the lead-lag relationship among the
monetary and macroeconomic variables incorporated in this study. The results are reported in table 4. None of
the monetary variables-LR, SR, EXR, and GM2-are found to Granger cause growth rate of real output in pairs
and jointly. The result indicates that saving rate, exchange rate and growth rate of money supply Granger cause
changes in lending rate pair wise and jointly. Growth rate of money supply is the only monetary variables that
cause savings rate pair wise and other variables are found to significantly Granger cause savings rate.
The reported results also reveal that savings rate Granger cause exchange rate and while bi-causality
exist between lending rate and exchange rate. All incorporate variables are found to significantly cause changes
in Exchange rate. While, none variables Granger cause growth rate of money supply pair wise and jointly.
Therefore, our empirical findings suggest that growth rate of real output is not a leading indictor for any
monetary variables incorporated in this study.
Table 4: Pair-wise Granger-Causality Test
VARIABLES GRY LR SR EXR GM2 ALL
GRY −−− 0.9785 0.9806 0.9951 0.4674 0.9687
LR 0.4286 −−− 0.0028 0.0354 0.0964 0.0121
SR 0.4130 0.4720 −−− 0.5207 0.0014 0.0164
EXR 0.8915 0.0411 0.0000 −−− 0.5269 0.0069
GM2 0.1232 0.1836 0.4941 0.9322 −−− 0.1717
Source: Authors Computation (2011)
5.5 Impulse Response Analysis
The innovation accounting test result for impulse response function of monetary variables on the real
economic growth is presented in table 5 and the graphical result is shown in figure 1. The impact of a shock to
the growth rate of real output experienced a mixed positive and negative effect. But the shock only exert
negative effect on real output growth at 3rd
and 7th
year time horizon and these were found significant.
The effect of a shock to each of the selected monetary variables to real growth rate of GDP exert a mix
7. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
28
of positive and negative effect throughout the 10 years time horizon of the analysis. Randomly, in terms of the
highest magnitude growth rate of money supply (GM2), lending rate (LR), saving rate (SR) and Exchange rate
(EXR) were found to exert positive effect on real growth of GDP as a result of a unit shock in the 1st
, 2nd
, 1st
and
6th
period respectively. On the other effect, savings rate (SR), Exchange rate (EXR), growth of money supply
(GM2) and lending rate (LR) were found to intact negative effect on the growth of real output as a result
innovation shock mechanisms in the 4th
, 1st
, 4th
and 1st
period respectively. The effect of a shock to exchange rate
to real output growth reveals a significant negative effect response all through the first 4 years period strengthen
till the 4th
period horizon. The negative effect transited to positive effect in the 5th
period, response of a shock to
exchange rate to real output growth from the 6th
to 10th
year period were found negative and this significantly
strengthen although the horizon.
Table 5: Response of GRY to a Innovation Shock on Monetary Variables
Period GRY LR SR EXR GM2
1 26.41286 0.000000 0.000000 0.000000 0.000000
2 0.661238 1.435209 -1.519377 -0.561482 -4.784431
3 -0.698744 -2.950748 1.946143 -0.676967 6.775426
4 2.888098 2.491797 -0.859577 -1.407471 0.779630
5 4.244178 -1.345469 -2.067679 0.680554 -2.988222
6 0.039586 -0.588694 -2.626996 -1.292019 0.986474
7 -1.008252 0.413860 0.628658 -1.872272 1.501353
8 0.108553 -0.004842 -1.313031 -0.021831 -0.253768
9 0.438500 -0.158383 -1.391095 -0.824163 2.573096
10 0.424186 0.979957 -0.895035 -1.280670 0.835889
Source: Authors Computation (2011)
Fig. 1. Impulse Response of GRY to Shocks in Monetary Variables
5.6 Forecast Error Variance Decomposition Analysis
The results of forecast error variance decomposition (FEVD) are presented in table 5. The test results
revealed that FEVD for the real growth rate of GDP could be attributed to growth rate of money supply (GM2),
savings rate (SR) and lending rate (LR), after 10 years, which account for 10.23% and 2.6% respectively. Even,
after 5 years the innovation of growth rate of real output is still more attributable to growth rate of money supply
-20
-10
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
Response of GRY to GRY
-20
-10
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
Response of GRY to LR
-20
-10
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
Response of GRY to SR
-20
-10
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
Response of GRY to EXR
-20
-10
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
Response of GRY to GM2
Response to Cholesky One S.D. Innovations ± 2 S.E.
8. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
29
(GM2), savings rate (SR) and lending rate (LR), which stood at 9.37%, 1.33% and 2.30% respectively. The
result interestingly revealed that the FEVD for real growth rate of GDP is still more attributable to itself
compared to any of the monetary variables selected both in the 5th
and 10th
year. Considering the first three
quarters of the time frame for the analysis of FEVD for real growth rate of GDP, the result revealed that the
growth rate of money supply (GM2), savings rate (SR) and lending rate (LR) are the three most important
monetary variables that account for the innovation in real output growth in Nigeria. Although, Exchange rate
(EXR) was found less significant in explaining the forecast error variance. However, FEVD results indicated that
there is significant evidence to show that the variance in the real growth rate of GDP can be accounted for by
innovation in it self over the 10 years period, compare to any of the next important factors taken as the growth
rate of money supply (GM2), savings rate (SR) and lending rate (LR).
Table 6: Forecast Error Variance Decomposition (FEVD) of GRY
Period S.Error GRY LR SR EXR GM2
1 26.41286 100.0000 0.000000 0.000000 0.000000 0.000000
2 26.93790 96.20005 0.283859 0.318129 0.043445 3.154518
3 28.01781 88.98934 1.371563 0.776560 0.098541 8.763995
4 28.33506 88.04670 2.114374 0.851297 0.343082 8.644550
5 28.92001 86.67470 2.246153 1.328382 0.384720 9.366040
6 29.09053 85.66177 2.260850 2.128340 0.577481 9.371555
7 29.21645 85.04402 2.261468 2.156331 0.983174 9.555008
8 29.24726 84.86637 2.256710 2.353341 0.981160 9.542422
9 29.40841 83.96104 2.234946 2.551373 1.048975 10.20367
10 29.48109 83.56826 2.334430 2.630979 1.232516 10.23381
Source: Authors Computation (2011)
5.7 Policy Implications of the Findings and Recommendation
This study has critically evaluates the dynamic interaction between monetary policy and economic
growth between 1970 and 2007. The policy implications of the findings in this study have shown that there may
exists conflicting policy options in achieving any of the macroeconomic objectives amidst other objectives. Out
of the time series variables employed, lending rate, savings rate and exchange rate were found unstable and non-
mean reverting and while the growth rate of real output and money supply are stationary at level using the
Augmented Dickey-Fuller unit root test.
The Johansen Cointegration test results indicate that at McKinnon-Haug-Michelis 5% significance level
of the Trace and Max Eigenvalue tests suggest that the incorporated variables are cointegrated for third and
fourth variant models of the test. This implies that there exist a long-run relationship between monetary variables
tools and economic growth in Nigeria. The pair-wise Granger-Causality test revealed that none of the monetary
variables-LR, SR, EXR, and GM2-are found to Granger cause growth rate of real output in pairs and jointly.
Therefore, our empirical findings suggest that growth rate of real output is not a leading indictor for any
monetary variables incorporated in this study. Finally using innovation accounting, the Impulse Response
Function (IRF) results indicate that the impact of shock to Exchange rate (EXR), Saving rate (SR), Lending rate
(LR) and growth rate of money supply (GM2) on economic growth (GRY) in this research reveal a mix positive
and negative effect throughout the sampled period. This was found consistent with other earlier empirical studies.
The forecast error variance decomposition (FEVD) test results indicate that the variance in the real growth rate
of GDP can significantly be accounted for by innovation in it self over the 10 years period, compare to any of the
next important factors taken as the growth rate of money supply (GM2), savings rate (SR), lending rate (LR) and
exchange rate (EXR). This implies that there is ARCH effect associated with variance of growth rate of GDP as
a result of shock to its previous growth rate.
In general, this paper proffers policy recommendations emanating from the empirical findings between
the analyses period of 1970 and 2007. The level of economic growth should not be used as a barometer in
determining major monetary policy rates because the result of the pair-wise Granger Causality test revealed that
growth rate of real output is not a leading indictor for any of the monetary variables considered in our study. In
other form, the previous performance of major monetary policy instruments should be employed as indicators of
predicting the growth rate of economic output in the current period because of the long-run mechanism
relationship existing among them. Since no economies of the world including Nigeria can easily avert economic
shocks, therefore the monetary policy authorities should regulate the level of major monetary rates like exchange
rate and lending rate which are highly shock prone towards economic growth in Nigeria. Thus, future studies can
extend this study to include other monetary indicators, fiscal policy variables and examine the inherent short-run
dynamic relationship through Vector Error Correction (VEC) Model.
9. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
30
References
Akinlo, A. E. (2007). The dynamics of money, output and prices in Nigeria, Paper Presented at the Central Bank
of Nigeria 2007 Executive Policy Seminar.
An, L. and Sun, W. (2008), “Monetary Policy, Foreign Exchange Intervention and The Exchange Rate: The Case
of Japan” International Research Journal of Finance and Economics.
Bernanke, Ben S., (1986). "Alternative explanations of the money-income correlation," Carnegie-Rochester
Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January
Busari, D., Omoke P., and B. Adesoye (2005): “Monetary Policy and Macroeconomic Stabilization Under
Alternative Exchange Rate Regime: evidence from Nigeria”. Union Digest, an Economic and Business
Publication of Union Bank of Nigeria Plc. Vol. 9. No 3 & 4, December.
http://www.unionbankng.com/busari_.pdf
Busari, T. D. and O. W. Olayiwola (1999) “Stabilization Policy in Nigeria Under Alternative Exchange Rate
Regimes: A Postulated Empirical Macro-Model Approach.” Economic and Financial Review (CBN),
Vo. 37 No.1: 21-35: March.
Caballero, R. and Corbo, C. (1989), “How does uncertainty about the real exchange rate affect exports?” PPR
Working Paper, No. 221. Washington, D.C: The World Bank.
CBN (1996), “Annual Reports and Statement of Accounts”, Central Bank of Nigeria.
Chete, L.N. (1995), “ Exchange Rate Depreciation and Balance of Payments Adjustment: The Nigerian Case”.
NISER Individual Research Project Report, NISER, Ibadan
Chuku A. C. (2009). Measuring the Effects of Monetary Policy Innovations in Nigeria: A Structural Vector
Autoregressive (SVAR) Approach. African Journal of Accounting, Economics, Finance and Banking
Research, Volume 5, No. 5.
Dale S. and Haldane A. , (1993). "Interest rates and the channels of monetary transmission: some sectoral
estimates," Bank of England working papers 88. Retrieved from
www.bankofengland.co.uk/publications/.../qb930401.pdf
Faust, J. and Rogers, J. H. (2003),“Monetary Policy role in Exchange Rate Behaviour” Journal of Monetary
Economics 50, 1107-1131.
Garba (1996), “What Can We Learn From Nigeria’s Experience With the World Bank’s Adjustment With
Growth Programme?” In - Beyond Adjustment- Management of the Nigerian Economy (Selected Papers
of the 1996 Annual Conference of The Nigerian Economic Society).
Johansen, S. (1997), “Likelihood-Based Interference in Cointegrated Vector Autoregressive
Mallick, S. (2010). “Macroeconomic Shocks, Monetary Policy and Implicit exchange rate targeting in India”.
www.qass.org.uk/2010-May_Brunel-conference/Mallick.
Models”, Oxford, Oxford University Press.
Montiel, P. (1991), “The Transmission Mechanism for Monetary Policy in Developing Countries”. IMF Staff
Papers Vol.38 (1) march pp 83-108
Omotor, D. G. (2007), Monetary policy and economic growth: Theoretical and conceptual issues, CBN
Economic and Financial Review 45 (4) 39-67.
Oyejide, T.A (2002), “Monetary Policy and its Effects on the Nigerian Economy”, Nigerian Economic Society –
Proceedings of a One-day Seminar on Monetary Policy and Exchange rate Stability, Federal Palace
Hotel, Lagos.
Rafiq, M.S. and S.K. Mallick (2008), The effect of monetary policy on output in EMU3: A sign restriction
approach, Journal of Macroeconomics (30) 1756-1791.
Sims, C. (1980), “Macroeconomics and Reality”, Econometrica Vol. 48 (January):148.
Sims, C. (1992), “Are Forecasting Models Usable for Policy Analysis?” Quarterly Review, Federal Reserve
Bank of Minneapolis:2-16.
Wikipedia (2010): Monetary Policy. http://www.en.wikipedia org/wiki/ Monetary _policy.html
10. Developing Country Studies www.iiste.org
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online)
Vol.4, No.14, 2014
31
Appendix
The Time Series Graphs of the Monetary and Macroeconomic Variables in Nigeria between 1970 and
2007
-50
0
50
100
150
1970 1975 1980 1985 1990 1995 2000 2005
GRY
LR
SR
EXR
GM2
-60
-40
-20
0
20
40
60
80
1970 1975 1980 1985 1990 1995 2000 2005
GRY
13. The IISTE is a pioneer in the Open-Access hosting service and academic event
management. The aim of the firm is Accelerating Global Knowledge Sharing.
More information about the firm can be found on the homepage:
http://www.iiste.org
CALL FOR JOURNAL PAPERS
There are more than 30 peer-reviewed academic journals hosted under the hosting
platform.
Prospective authors of journals can find the submission instruction on the
following page: http://www.iiste.org/journals/ All the journals articles are available
online to the readers all over the world without financial, legal, or technical barriers
other than those inseparable from gaining access to the internet itself. Paper version
of the journals is also available upon request of readers and authors.
MORE RESOURCES
Book publication information: http://www.iiste.org/book/
IISTE Knowledge Sharing Partners
EBSCO, Index Copernicus, Ulrich's Periodicals Directory, JournalTOCS, PKP Open
Archives Harvester, Bielefeld Academic Search Engine, Elektronische
Zeitschriftenbibliothek EZB, Open J-Gate, OCLC WorldCat, Universe Digtial
Library , NewJour, Google Scholar
14. Business, Economics, Finance and Management Journals PAPER SUBMISSION EMAIL
European Journal of Business and Management EJBM@iiste.org
Research Journal of Finance and Accounting RJFA@iiste.org
Journal of Economics and Sustainable Development JESD@iiste.org
Information and Knowledge Management IKM@iiste.org
Journal of Developing Country Studies DCS@iiste.org
Industrial Engineering Letters IEL@iiste.org
Physical Sciences, Mathematics and Chemistry Journals PAPER SUBMISSION EMAIL
Journal of Natural Sciences Research JNSR@iiste.org
Journal of Chemistry and Materials Research CMR@iiste.org
Journal of Mathematical Theory and Modeling MTM@iiste.org
Advances in Physics Theories and Applications APTA@iiste.org
Chemical and Process Engineering Research CPER@iiste.org
Engineering, Technology and Systems Journals PAPER SUBMISSION EMAIL
Computer Engineering and Intelligent Systems CEIS@iiste.org
Innovative Systems Design and Engineering ISDE@iiste.org
Journal of Energy Technologies and Policy JETP@iiste.org
Information and Knowledge Management IKM@iiste.org
Journal of Control Theory and Informatics CTI@iiste.org
Journal of Information Engineering and Applications JIEA@iiste.org
Industrial Engineering Letters IEL@iiste.org
Journal of Network and Complex Systems NCS@iiste.org
Environment, Civil, Materials Sciences Journals PAPER SUBMISSION EMAIL
Journal of Environment and Earth Science JEES@iiste.org
Journal of Civil and Environmental Research CER@iiste.org
Journal of Natural Sciences Research JNSR@iiste.org
Life Science, Food and Medical Sciences PAPER SUBMISSION EMAIL
Advances in Life Science and Technology ALST@iiste.org
Journal of Natural Sciences Research JNSR@iiste.org
Journal of Biology, Agriculture and Healthcare JBAH@iiste.org
Journal of Food Science and Quality Management FSQM@iiste.org
Journal of Chemistry and Materials Research CMR@iiste.org
Education, and other Social Sciences PAPER SUBMISSION EMAIL
Journal of Education and Practice JEP@iiste.org
Journal of Law, Policy and Globalization JLPG@iiste.org
Journal of New Media and Mass Communication NMMC@iiste.org
Journal of Energy Technologies and Policy JETP@iiste.org
Historical Research Letter HRL@iiste.org
Public Policy and Administration Research PPAR@iiste.org
International Affairs and Global Strategy IAGS@iiste.org
Research on Humanities and Social Sciences RHSS@iiste.org
Journal of Developing Country Studies DCS@iiste.org
Journal of Arts and Design Studies ADS@iiste.org