Monetary Policy and Economic Growth in Nigeria: An Ardl-Bound Testing and ECM Approach
Monetary Policy and Economic Growth in Nigeria: An Ardl-Bound Testing and ECM Approach

Summary/Abstract: The aim of this study is to examine the relationship between monetary policy and economic growth in which the past studies have shown conflicting results in Nigeria. Data was collected from the Central Bank of Nigeria Statistical Bulletin from 1990 to 2017 and Autoregressive Distributed Lag (ARDL) model and Error Correction Model (ECM) were utilized to address the objective of the study. Consequently, the result of ECM term indicates that about 16% of the total disequilibrium in the previous year due to shock was corrected in the current year. There is a significant negative relationship between exchange rate and economic growth in the short run. Also, there is a significant positive relationship between monetary policy rate and economic growth in the short run. In addition, economic growth and credit reserve ratio have a negative relationship in both short run and long run. Economic growth and inflation rate have a significant positive relationship in both short run and long run. Therefore, this study makes the following recommendations for the policy makers and future researchers in Nigeria: the policy makers in Nigeria should increase the level of broad money supply in the country since both the broad money supply and inflation lead to economic growth in the short run and the long run. Also, the apex bank in Nigeria should embark on the use of appropriate monetary policy variables that will address non-performance of credit requirement ratio, monetary policy rate and exchange rate in contributing to the nation`s economic growth.

• Details
• Contents