Transmission Mechanisms of Monetary Policy in Nigeria A Dynamic Stochastic Approach (original) (raw)

Impact of Credit Channel of Monetary Policy Transmission Mechanism on the Nigerian Economy

Journal of Global Economics and Business

This study is predicated on the long age debate among scholars and Theorists with respect to monetary policy transmission mechanism. Some schools of thought believe that money does not matter and monetary policy is ineffective in influencing real economic variables such as employment and real output. While other schools claim that money matters and monetary policy can influence real economic activities at least in the short run. The last school of thought is those in between these two opponents who believe that the link between money and output is actually reverse causation not the other way round. These controversies revolve on the issue of ascertaining the channel of transmitting monetary policy actions into the economy. Therefore, using the Vector Autoregressive (VAR) Model, this study sought to empirically analyze credit channel of monetary policy transmission mechanism in Nigeria. Applying the time series data spanning the periods of 56 years 1960-2016, the empirical analysis f...

TRANSMISSION MECHANISM OF MONETARY POLICY IN NIGERIA

This paper, explored the empirical importance of credit. It adds to the existing literature in two ways. First, it analyses in a systematic way both endogenous and exogenous instruments of monetary mechanism using information on the country’s main economic objectives as a proxy for bank credit availability by providing a framework in which to analyse the evidence in controlling money and credit. Second, by using bank’s prices (rather than quantities) it provides an alternative way to disentangle loan supply from loan demand shift in the ‘credit channel’ literature. The paper also provides empirical evidence on the role of banks in the monetary transmission process. The principal channel appears through lending to firms, which influences entire economy investment. The existence of an effective banking industry is necessary for every economy because it create the necessary environment for economic growth and development through its role in intermediating funds from surplus to deficit economic units. This stimulates investment economic growth, and employment as well as international trade and payment. The bottom line is that credit is an important part of the transmission process of Nigerian Monetary Policy.

Assessment of interest rate channel Effectiveness in the transmission of Monetary Policy in Nigeria

Applied Journal of Economics, Management, and Social Sciences, 2022

This study attempted to investigate the effectiveness of the interest rate channel in the transmission of monetary policy by employing a structural vector autoregressive (SVAR) model using sign restriction. It used a set of policy and non-policy macroeconomic variables based on monthly data spanning the period 2007 and 2020. The structural impulse response functions provided evidence to support the use of the MPR as a signaling rate for domestic interest rates but was, however, found to be ineffective in stabilizing prices or increasing output. Furthermore, results from the variance decomposition of the non-policy variables found the effect of exchange rate innovations to be more significant in explaining variations in the price level. The study, therefore, concludes that the effectiveness of the policy rate in stabilizing prices is dampened by shocks prevalent from the external sector. Given the importance of international trade, the study recommends aggressive exchange rate management including policies that encourage import-substitution to build reserves and strengthen the value of the domestic currency.

Monetary Policy Transmission Channels and Economic Growth in Nigeria

Asian Journal of Economics and Empirical Research, 2019

This study empirically analyzes monetary policy transmission channels and economic growth in Nigeria using the vector auto regression model. Time series data were used for the period of 56 years (1960 to 2016) and sourced from the Central Bank of Nigeria statistical bulletin for various issues. The analyses show a good number of findings. Firstly, the unit root test results shows that all the variables of transmission channels are non-stationary at level, but appear stationary at first difference. Hence, the series are all integrated of order I (1). This of course authorized the study to proceed with the co-integration test which revealed that there is a long run relationship between monetary policy transmission channels and economic growth in Nigeria. Following the fact that the variables under study are co-integrated, the study went further to estimate the vector autoregressive model. The baseline result of the vector autoregressive model indicates that there exist a significant positive short run relationship between the channels of monetary policy transmission and macroeconomic output in Nigeria. Therefore, we conclude that interest rate and credit channels are critical channels for transmitting monetary policy impulses into the Nigeria economy. Based on this, the study recommends among others that the Nigeria monetary authority should as a matter of policy encourage and emphasize the good management of the transmission channels and this should be vigorously pursued, as it has the ability to trigger growth of the Nigeria economy.

Bank Lending Channel of Monetary policy Transmission Mechanism in Nigeria

This paper investigated the existence of a bank lending channel in monetary policy transmission in Nigeria using quarterly data spanning the period 2002:1 through 2017:1. The analysis was conducted using Vector Error Correction Mechanism (VECM). Findings revealed the presence of three cointegrating relationship among the variables, identified as loan demand and supply by testing for exclusion and exogeneity restrictions on the cointegrating relationships. The study also found that loan supply was significant and positively associated with borrowing rate but negatively significant with lending rate equation which supports the existence of a lending channel for monetary transmission process. The policy implication of this is that, if the CBN raises the policy rate, bank supply of loan will respond negatively. This will restrict the total amount of loan that banks can offer to the private sector. Based on this finding we therefore recommend that the apex bank should give more credence to credit rates when instituting its monetary policies transmission.