Monetary policy and economic performance in nigeria (1981-2017): an ardl approach

International Journal of Economics and Management Studies

© 2019 by SSRG - IJEMS Journal

Volume 6 Issue 11

Year of Publication : 2019

Authors : Johnson A. Atan , Pius EffiongAkpan

10.14445/23939125/IJEMS-V6I11P109

How to Cite?

Johnson A. Atan , Pius EffiongAkpan, "Monetary policy and economic performance in nigeria (1981-2017): an ardl approach," SSRG International Journal of Economics and Management Studies, vol. 6,  no. 11, pp. an ardl approach" SSRG International Journal of Economics and Management Studies 611 (201973-88, 2019. Crossref, https://doi.org/10.14445/23939125/IJEMS-V6I11P109

Abstract:

This paper examined the short and long run impact of monetary policy on the performance of the Nigerian economy (measured by real GDP) for the period 1981 to 2017 using Auto Regressive Distributed Lag (ARDL) approach. To identify the stationarity characteristics and cointegration relationship of the variables, the Augmented Dickey Fuller(ADF) and Philip Perron(PP) unit root tests as well as the F-Bound testing technique were employed respectively. The unit root test results revealed stationarity at levels and first difference, while the F-bound test showed the existence of long run relationships among the variables.The Granger causality test which was adopted to show the feedback effects, indicated the existence of bidirectional causality between required reserve and real GDP, while unidirectional causality existed between exchange rate, open market operations, money supply and real GDP. The short run ARDL results indicated the existence of a negative but significant relationship between these monetary variables (broad money supply, open market operations, required reserve) and real GDP, while monetary policy rate was positively and significantly related to real GDP. The long run ARDL empirical results showed that all the monetary variables(exchange rate, monetary policy rate, broad money supply, open market operations, required reserve) were significantly related to real GDP during the period under review. Therefore, the empirical evidence of the short and long run ARDL results confirmed that monetary policy is a vital tool that could be employed to regulate the economy in order to achieve set objectives. However, it is recommended from the study that monetary policy should be more effectively implemented both in the short and long run particularly geared towards enhancing the overall productivity of the economy so that their potential beneficial effects would be appreciably felt in the country.

Keywords:

Monetary Policy, ARDL, Real GDP and F-Bound Test

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