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

Idris, Miftahu

doi:10.11648/j.ijber.20190805.17

Cited by 5 publications

(4 citation statements)

References 32 publications

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“…Moreover, the standard deviation of broad money supply (MS2 t ) business cycle, standard deviation of and real bilateral exchange rate Riyal‐USD (EX t ) business cycle, is calculated using the following formula: EX t = log (Riyal*US CPI/Saudi CPI). Both the real exchange rate (EX t ) and the real US interest rate (USR t ) are included as independent variables to capture the impact of monetary volatility on economic activity (Mallick and Sousa, 2009; Idris, 2019; Akalpler and Duhok, 2018; Timi, 2018; Tasos, 2019; and Daniel and Inim, 2020). The absence of data on local interest rate variable for the early 1970s and up to 1990s is due to the Islamic codes, and since the riyal is pegged to the US dollar, the internal rate follows the changes in the US interest rate (Adedeji, et al ., 2019).…”

Section: Methodsmentioning

confidence: 99%

“…However, the real exchange rate has a positive effect on real per‐capita GDP in the long run. In the same vein, Idris (2019) examined the relationship between monetary policy and economic growth in Nigeria from 1980 to 2017. His study used OLS and cointegration techniques whose results indicate a positive effect while showing that exchange rate and interest rate have a negative effect on economic growth.…”

Section: Review Of Related Literaturementioning

confidence: 99%

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Monetary volatility and the dynamics of economic growth: An empirical analysis of an oil‐based economy, 1970–2018

Algaeed

Algethami

2022

OPEC Energy Review

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Over the past decades, and since the first development plan in 1970, Saudi Arabia has controlled the stability of its economy through prudent fiscal policy and tight monetary policy. This study examines the impact of monetary volatility on real gross domestic product (GDP) growth in an oil‐based economy from 1970 to 2018, using the Hodrick–Prescott filtering approach. Although standard methods such as GARCH are used to test volatility, the uniqueness of this study is that it tests the volatility of monetary policy using ordinary least squares (OLS), autoregressive distributed lag (ARDL) and IRF methods. We find that the standard deviation of the broad money supply and the real interest rate business cycle tends to have a negative impact on real growth in the short and long run, supporting the proposition that a high interest rate negatively affects real growth. We also document that the standard deviation of the real exchange rate business cycle has a positive (negative) effect on real growth in the short and long run and is not statistically significant. This suggests that the volatility of the real exchange rate does not affect real growth. Moreover, the magnitude of the volatility of the coefficients is lower in the long run than in the short run. To achieve sustainable economic growth, policy makers need to plan how to manage the volatility of the money supply and the interest rate in the short run and develop long‐run strategies to manage volatility in the long run. To control monetary volatility, policymakers should also control government spending by dampening the volatility of oil prices, which ultimately affect the money supply and thus stable economic growth.

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Section: Methodsmentioning

confidence: 99%

Section: Review Of Related Literaturementioning

confidence: 99%

Monetary volatility and the dynamics of economic growth: An empirical analysis of an oil‐based economy, 1970–2018

Algaeed

Algethami

2022

OPEC Energy Review

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“…Similarly, Idris (2019) Measures of interest rate and liquidity ratio, on the other hand, had a negative but highly significant impact on economic growth.In addition, Engle-Granger co-integration test showed the existence of a long-run relationship between monetary policy and economic growth in Nigeria.…”

Section: Empirical Literature Reviewmentioning

confidence: 99%

An Assessment of the Impact of Monetary Policy on Economic Growth in Nigeria: Toda-Yamamoto Approach

David¹,

Ita²,

Eyo³

et al. 2022

IJRISS

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This study interrogated the impact of monetary policy on economic growth in Nigeria using annual time series data from 1981 to 2020. The paper used the growth rate of gross domestic product (GRGDP) as the endogenous variable, while, broad money supply (MS2), monetary policy rate (MPR), Inflation (INFL), liquidity ratio (LDQR) and exchange rate (EXCH) were the exogenous variables and proxies for monetary policy. Data were obtained from the Central Bank of Nigeria’s Statistical Bulletin of various years and World Bank National Account Data. The study used descriptive statistics, performed a unit root test using Augmented Dickey-Fuller, Autoregressive Distributed Lag (ARDL) Bound test, and to test for causality, Toda Yamamoto was deployed. Finally, the Toda Yamamoto Causality test revealed that all the exogenous variables had bi-directional causality with economic growth except for the exchange rate that had uni-directional causality with economic growth. In the light of the findings, the study recommends that Broad Money Supply (MS2) should be adequately managed and manipulated to achieve the needy growth, in line with pursued monetary policy stance of the monetary authority. Also, the monetary authority and the government should vigorously pursue policies that would increase financial inclusion in Nigeria as it would enhance the effectiveness of the monetary policy.

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“…Researchers on how monetary policies affect economic activities in developing countries have diverse opinions. Many researchers believe that monetary policy significantly affects economic activities, while others believe it is unsuccessful to generate real economic activities as they assert that money and output have an insignificant association (Idris, 2019;Donkor et al, 2021). Given these conflicting and diverse perceptions, many researchers have given their opinions from different perspectives (Bernanke & Gertler, 1995;Zgambo & Chileshe, 2014).…”

Section: Introductionmentioning

confidence: 99%

Analyzing Various Channels of Monetary Policy Transmission Mechanism: The Case of Pakistan

Ghauri

Hamid

Zaman

2022

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This paper analyzes Pakistan's monetary policy transmission mechanism by considering these channels: Interest rate Channel, Credit Channel, and Risk channel. In this study, an innovative channel, Risk Channel, is introduced to measure its impact on the monetary policy transmission mechanism by covering the annual time data from 1995 to 2020for Pakistan. This paper aims to examine the long-run and the short-run relationship between foreign debt, bank capital, and monetary policy transmission mechanism. To fulfill this objective, we intended to use Autoregressive Distributed Lag (ARDL) model to investigate long-run and short-run relations. As per the result, the risk channel represents that it is not following the cointegration benchmark. The coefficient is negative, but the probability is more significant than 0.05, which is statistically insignificant; therefore, there is no long-run relationship between the model variables. The interest rate channel represents that it ensures the benchmark of cointegration as the coefficient is negative, but the probability is less than 0.05, which is statistically significant; therefore, there is a long-run relationship between variables for the model. The credit channel represents that it ensures the cointegration benchmark as the coefficient is negative and statistically significant at 90%; therefore, there is a long-run relationship between variables for the model. However, the study concluded that risk channel has short-term relation and interest rate& credit channels have short-term and long-term relationships.

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

Cited by 5 publications

References 32 publications

Monetary volatility and the dynamics of economic growth: An empirical analysis of an oil‐based economy, 1970–2018

Monetary volatility and the dynamics of economic growth: An empirical analysis of an oil‐based economy, 1970–2018

An Assessment of the Impact of Monetary Policy on Economic Growth in Nigeria: Toda-Yamamoto Approach

Analyzing Various Channels of Monetary Policy Transmission Mechanism: The Case of Pakistan

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