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Monetary Policy and Economic Growth in Developing Countries: Evaluating the Policy Nexus in Nigeria

Received: 3 July 2019     Accepted: 7 August 2019     Published: 26 August 2019
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Abstract

While there are numerous studies on the relationship between monetary policy and economic growth, evaluating the policy nexus between the two phenomena remain inconclusive. Undeniably, monetary policy is believe to influence the employment level, price stability, growth of aggregate output and equilibrium in the balance of payment- for the case of developing economies. But the magnitude of its influence largely depends on how it is conducted through various channels and the independency of the apex bank to select the appropriate instruments for formulating the monetary policy. In lieu of that, this study examines the relationship between monetary policy and economic growth in Nigeria using time series data covering the period of 1980 to 2017. The study employs the Cointegration test and the Ordinary Least Square (OLS) technique with the view to estimating the model coefficients and showcase the policy nexus between the variables. Result indicates the existence of long-run relationship between monetary policy indicators and economic growth. Further empirical findings show that money supply has positive effect, while both exchange rate and interest rate have negative effect on the real GDP. As such, monetary authorities in Nigeria should adequately managed and monitored the growth level of money supply in order to realise the desired growth level. Given the socio-economic and political conditions in Nigeria, there is growing needs to formulate appropriate monetary measures which might encourage borrowing through sound and productive interest rate as well as stable exchange rate.

Published in International Journal of Business and Economics Research (Volume 8, Issue 5)
DOI 10.11648/j.ijber.20190805.17
Page(s) 303-313
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Monetary Policy, Economic Growth, Cointegration Test, OLS Technique, Nigeria

References
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  • APA Style

    Miftahu Idris. (2019). Monetary Policy and Economic Growth in Developing Countries: Evaluating the Policy Nexus in Nigeria. International Journal of Business and Economics Research, 8(5), 303-313. https://doi.org/10.11648/j.ijber.20190805.17

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    ACS Style

    Miftahu Idris. Monetary Policy and Economic Growth in Developing Countries: Evaluating the Policy Nexus in Nigeria. Int. J. Bus. Econ. Res. 2019, 8(5), 303-313. doi: 10.11648/j.ijber.20190805.17

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    AMA Style

    Miftahu Idris. Monetary Policy and Economic Growth in Developing Countries: Evaluating the Policy Nexus in Nigeria. Int J Bus Econ Res. 2019;8(5):303-313. doi: 10.11648/j.ijber.20190805.17

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  • @article{10.11648/j.ijber.20190805.17,
      author = {Miftahu Idris},
      title = {Monetary Policy and Economic Growth in Developing Countries: Evaluating the Policy Nexus in Nigeria},
      journal = {International Journal of Business and Economics Research},
      volume = {8},
      number = {5},
      pages = {303-313},
      doi = {10.11648/j.ijber.20190805.17},
      url = {https://doi.org/10.11648/j.ijber.20190805.17},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190805.17},
      abstract = {While there are numerous studies on the relationship between monetary policy and economic growth, evaluating the policy nexus between the two phenomena remain inconclusive. Undeniably, monetary policy is believe to influence the employment level, price stability, growth of aggregate output and equilibrium in the balance of payment- for the case of developing economies. But the magnitude of its influence largely depends on how it is conducted through various channels and the independency of the apex bank to select the appropriate instruments for formulating the monetary policy. In lieu of that, this study examines the relationship between monetary policy and economic growth in Nigeria using time series data covering the period of 1980 to 2017. The study employs the Cointegration test and the Ordinary Least Square (OLS) technique with the view to estimating the model coefficients and showcase the policy nexus between the variables. Result indicates the existence of long-run relationship between monetary policy indicators and economic growth. Further empirical findings show that money supply has positive effect, while both exchange rate and interest rate have negative effect on the real GDP. As such, monetary authorities in Nigeria should adequately managed and monitored the growth level of money supply in order to realise the desired growth level. Given the socio-economic and political conditions in Nigeria, there is growing needs to formulate appropriate monetary measures which might encourage borrowing through sound and productive interest rate as well as stable exchange rate.},
     year = {2019}
    }
    

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    T1  - Monetary Policy and Economic Growth in Developing Countries: Evaluating the Policy Nexus in Nigeria
    AU  - Miftahu Idris
    Y1  - 2019/08/26
    PY  - 2019
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    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
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    AB  - While there are numerous studies on the relationship between monetary policy and economic growth, evaluating the policy nexus between the two phenomena remain inconclusive. Undeniably, monetary policy is believe to influence the employment level, price stability, growth of aggregate output and equilibrium in the balance of payment- for the case of developing economies. But the magnitude of its influence largely depends on how it is conducted through various channels and the independency of the apex bank to select the appropriate instruments for formulating the monetary policy. In lieu of that, this study examines the relationship between monetary policy and economic growth in Nigeria using time series data covering the period of 1980 to 2017. The study employs the Cointegration test and the Ordinary Least Square (OLS) technique with the view to estimating the model coefficients and showcase the policy nexus between the variables. Result indicates the existence of long-run relationship between monetary policy indicators and economic growth. Further empirical findings show that money supply has positive effect, while both exchange rate and interest rate have negative effect on the real GDP. As such, monetary authorities in Nigeria should adequately managed and monitored the growth level of money supply in order to realise the desired growth level. Given the socio-economic and political conditions in Nigeria, there is growing needs to formulate appropriate monetary measures which might encourage borrowing through sound and productive interest rate as well as stable exchange rate.
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Author Information
  • Department of Economics, Taraba State University, Jalingo, Nigeria

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