How Effective is Monetary Policy in the Presence of High Informality in Nigeria

Peters, Idowu; Baba, Yaaba N.; Olufunso, Adetoba O.; Aduni, Tomologu Okunomo E.; Joseph, Tonuchi Emmanuel

doi:10.20448/2002.102.84.93

Cited by 3 publications

(6 citation statements)

References 13 publications

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“…While exchange rate channel appears to be more prominent in the literature (Yaaba, 2013;Tule et' al, 2014;Idowu et' al, 2020), because it seems to be more effective in an export driven economy. A productive economy enjoys exchange rate depreciation which leads to positive net export (through increase in export to the rest of the world) and increase in output, income and employment in the economy.…”

Section: Impulse Response Functionmentioning

confidence: 99%

“…Several studies found that over 1 Conclusions on the most effective channel have varied from one economic clime to another and have, to a large extent, been informed by the structure and level of development of the economy being studied. This does not undermine the importance of credit channel in monetary policy transmission mechanism, in fact, some studies found strong evidence to support the credit channel, see Yaaba (2013), Tule et' al (2014) and Idowu et' al (2020). time, however, market interest rates seem to have become less responsive to changes in the policy rate as witnessed in the volatility in short-term interbank lending rates, particularly, the overnight Call and Open Buy Back rates (see 2013).…”

Section: Introductionmentioning

confidence: 95%

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

Yusuf¹,

AFIEMO²,

ISAH³

2022

AJMSS

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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.

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Section: Impulse Response Functionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 95%

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

Yusuf¹,

AFIEMO²,

ISAH³

2022

AJMSS

View full text Add to dashboard Cite

show abstract

“…It is also noted by Azam (2023) that along with the prime goal of managing money supply, MP may also be devised to adjust a deficit in the balance of payment of a country. Further, Idowu et al (2020) argued that economic theory expounded that when rate of interest is decreased, the economy's consumption level will likely increase due to lower propensity to save and capital costs. Contradictory, a rise in the rate of interest is probably going to slow down spending and investment, which would have a negative impact on the total demand.…”

Section: Introductionmentioning

confidence: 99%

“…The interest rate system is the second route through which monetary policy is transmitted. When the average rate of interest changes in the country, likewise financial market’s borrowing and lending rates also fluctuates (Idowu et al , 2020). It is also noted by Azam (2023) that along with the prime goal of managing money supply, MP may also be devised to adjust a deficit in the balance of payment of a country.…”

Section: Introductionmentioning

confidence: 99%

“…There are other dimensions which can be regarded as an important factor influencing the monetary policy effectiveness in any economy. For instance, monetary policy is regarded as efficient when central banks’ measured serve to stabilize the economy, particularly financial aspects including investment, level of price and lending rate (Idowu et al , 2020; Tahir, 2012). The pricing level is a crucial element of the financial part of the economy that has a substantial impact on the state of the economy as a whole.…”

Section: Introductionmentioning

confidence: 99%

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Monetary policy effectiveness in Asian developing economies: the moderating role of financial sector development

Azam

Khan

Saleem

2023

JFEP

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Purpose This study aims to explore the impact of monetary policy on bank lending rate with the moderating effects of financial sector development for eight Asian developing economics. Design/methodology/approach This study uses panel autoregressive distributed lag/pooled mean group estimation over the period ranging from 1980 to 2020. Findings The empirical results exhibit an inverse link between monetary policy measured by broad money supply on the bank lending rate, indicating that the increase in the money supply by the central bank lowers the demand for loans and thereby lowers the cost of loan. Moreover, financial sector development decreases the lending rate and thus lowers cost of loan. It is also noted that the interactive term of monetary policy by lending broad money supply and financial sector development showed a positive impact on the lending rate in selected Asian developing countries during the period under the study. Practical implications The outcomes have many relevant policy implications that stronger financial development sector contributes to the efficiency of monetary policy. Regulators and policymakers are therefore recommended to pursue greater financial sector development to lower the cost for fund searchers and to lower the cost of loans, money supply increase is suggested. Originality/value This study contributes to the extant literature on the factors affecting lending rate with the prime aims of monetary policy effectiveness. This study also included financial sector development with some other variables and an interactive term of monetary policy with financial development to have new insight impact of both on the lending rate in developing Asian economies.

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Estimating Price and Exchange rate Hedging Elasticity of Cryptocurrency Demand in Nigeria

Joseph

Nwolisa²,

Obikaonu³

2022

AEMR

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This study examined the price and exchange rate hedging elasticity of cryptocurrency demand in Nigeria. To achieve the objective, the study employed Autoregressive Distributed Lag (ADRL) model to estimate both the short-run and long-run response of demand to changes in crypto price, consumer income and exchange rate. The Study found among others that cryptocurrency is demanded as a financial asset (either as money for exchange purpose or asset for speculative purpose). It was discovered that cryptocurrency price changes have significant impact on cryptocurrency demand but price inelastic. Meaning that a percentage changes in crypto price leads to less than proportionate change in cryptocurrency demand. It was also discovered that Nigeria real exchange rate has negative relationship with cryptocurrency demand meaning that as Naira real exchange rate to dollar is falling, the demand for cryptocurrency is rising. Other factors that are influencing cryptocurrency demand in Nigeria include consumer income, cryptocurrency popularity, and inflation rate in the country. The study concludes that while price plays an important role in cryptocurrency demand, fluctuations in cryptocurrency demand is less than the fluctuation in its price. The implication is that there are several other factors (structural issues) including real exchange rate movement that influences demands for cryptocurrency other than its price that policy makers should explore.

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How Effective is Monetary Policy in the Presence of High Informality in Nigeria

Cited by 3 publications

References 13 publications

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

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

Monetary policy effectiveness in Asian developing economies: the moderating role of financial sector development

Estimating Price and Exchange rate Hedging Elasticity of Cryptocurrency Demand in Nigeria

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