AN APPRAISAL OF THE IMPACT OF MONETARY POLICIES ON THE NIGERIA ECONOMY

ABSTRACT

This work empirically appraises an impact of the monetary policy on the Nigerian economy with time frame of 1981 to 2019. Specifically, the study examined the short-run and long-run relationship between monetary policy variables used and economic growth, proxied by the real GDP. The study employed the auto-regressive distributed lag (ARDL) bound test due to the mixed order of integration for variables. In the light of this, the error correction model (ECM) was also utilized, as well as the pairwise granger causality test. In line with the data analysed and interpreted, the study uncovered that monetary policy has both short-run impact on economic growth as surrogated by the real GDP. Through with more impact in the long-run than short-run which negates the monetary promulgations? The granger causality test reveals bidirectionality between the variables of the study. Drawing from the findings of the study, these researches therefore recommend that open market operation through the issuance of treasury bills have to be maintained and sustained to boost credit and liquidity in circulation. Moreso, expansionary monetary policy should also be instituted to ensure that there is money and credit in circulation to stimulate consumers’ spending and aggregate demand especially as the country just existed recession and to consequently enhance economic growth.