EFFECT OF MONETARY POLICY TRANSMISSION MECHANISM ON ECONOMIC GROWTH IN NIGERIA: AN AUTO REGRESSIVE DISTRIBUTED LAG (ARDL) APPROACH
Dr Titus Wuyah Yunana
Volume 1 Issue 1
Abstract
This study uses the ARDL model and examined the effect of monetary policy transmission mechanism on economic growth in Nigeria spanning the period 1986-2019. The study sourced it data from National Bureau of Statistics (NBS) and 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. Real gross domestic product (RGDP) was proxy for economic growth while interest rate (INTR) and exchange rate (EXR) channels were selected and used as monetary policy transmission mechanism variables. The study finds that in both long-run and short-run ARDL estimation interest rate and exchange rate channels have negative effects on real gross domestic product but are statistically significant on real gross domestic product (economic growth) in Nigeria during the period under investigation. The coefficients of interest rate channel are -0.19 and -0.64 for both long-run and short-run ARDL estimation respectively. Exchange rate channel coefficients are -0.32 and -0.01 for both long-run and short-run ARDL estimation respectively. The study therefore concludes that interest rate channel is a strong determinates of monetary policy transmission in stimulating economic growth in Nigeria. The study, therefore, recommends that there should be efficient manipulation of interest rate that will give investors confidence to borrow for investment which would consequently increase production and economic growth in the country through the Central Bank of Nigeria. Keywords: Economic Growth, Exchange Rate, Interest Rate, Monetary Policy
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