Does monetary policy induce economic growth? An empirical evaluation of the Nigerian economy
The goal of every economy is to attain the highest level of economic growth and development. Monetary and fiscal policies are instruments which the government of any nation can employ to effectively acheive the desired growth of their respective economies. This study investigates the extent to which monetary policies can promote economic growth in Nigeria covering the period of 1980 - 2016. In doing this, the study used secondary data from the Central Bank of Nigeria Statistical bulletin and National Bureau of Statistics various issues. The econometric technique of Ordinary Least Squares (OLS), Johansen co-integration and the vector error correction model (VECM) were employed in analyzing the data collected for this study. The result showed that monetary policies did not have a significant impact on Nigeria's economic growth in the short run, but significantly affected the country's growth in the long run. The non significance of the nation's monetary policies on economic growth in the short run is a strong proof of the gap between monetary policy formulation and implementation. Furthermore, monetary policies should be employed to create favourable investment climate by aiding the emergence of market based interest rate and exchange rate that will bring in both domestic and foreign investments. Finally, the Central Bank of Nigeria and the Federal Ministry of Finance should ensure there is efficient coordination of monetary and fiscal policies to spur economic growth in Nigeria
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