EMPIRICAL ANALYSIS OF THE EFFECT OF EXCHANGE RATE CHANNEL OF MONETARY POLICY TRANSMISSION MECHANISM ON NIGERIAN ECONOMY
Sadiq Muhammed Turi
Volume 1 Issue 1
Abstract
This study examined the effect of exchange rate channel of monetary policy transmission mechanism on Nigerian economy spanning the period 1986-2020. Data were generated from the Central Bank of Nigerian (CBN) Annual Statistical Bulletin. The study used ARDL model and analysed the effect of monetary policy transmission mechanism on economic growth in Nigeria. Gross domestic product (GDP) was proxy for economic growth while exchange rate (ER) and interest rate (IR) were monetary policy transmission mechanism variables. The study finds that exchange rate and interest rate have negative effects on gross domestic product and are statistically significant on real gross domestic product (economic growth) in Nigeria during the period under study. The study, therefore, recommends that there should be efficient manipulation of exchange rate and interest rare that will give both local and foreign investors confidence to borrow for investment which would consequently increase production and economic growth in the country through the Central Bank of Nigeria. Keywords: Exchange Rate, Interest Rate, Monetary Policy, Transmission Mechanism
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