IMPACT OF MONETARY POLICY SHOCKS ON AGGREGATE DEMAND IN NIGERIA: (1986-2017)
EGWAIKHIDE IMOUDU CHRISTIAN, SULEIMAN SA’AD, SAHEED ZAKAREE AND YUNANA TITUS WUYAH
Volume 5 Issue 1
Abstract
The Study examined the impact of monetary policy shocks on aggregate demand in Nigeria spanning the period of 1986-2017.Data were extracted from the Central Bank Statistical Bulletin and National Bureau of Statistics. The study employed macro econometric model using the two stage least square regression analysis and simulation experiment was carried out. The results revealed that monetary policy have impact on aggregate demand as monetary policy variables money supply and interest rate are statistically significant. The simulation result also revealed that lowering interest rate by 0.5% will increase aggregate demand by 0.42% and increasing money supply by 0.5% will increase aggregate demand by 0.53%. The study recommends for effective expansionary monetary policy in order to stimulate aggregate demand by reduce interest rate and increase money supply to sectors such as agriculture and manufacturing which deposit money banks often time find difficult to extend credit to. Keywords: Monetary Policy, Aggregate demand, Interest rate, Money Supply, Simulation
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