IMPACT OF MONETARY POLICY ON ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study has examined the impact of monetary policy on economic growth in Nigeria, from 1990 to 2020. The study adopted a regression model in line with Adegbite and Alabi (2013). Hence; Monetary Policy rate (MPR), Money supply (MS), Exchange rate (EXCH), Government expenditure (GEXP) and Investment rate (INV) was regressed against economic growth proxied by Real GDP. The data obtained were subjected to trend analysis, descriptive and inferential statistics including pairwise correlation, unit Root test and Error Correction Model. The analysis was carried out with the aid of EView version 10. The descriptive analysis revealed that the variables in the study have distinct measures of central tendency and of dispersion. The Jarque-Bera statistics and their corresponding probability values summed it up that that all the parameters were normally distributed since the skewness were not far from zeros and P>0.05 for all the parameters. The pairwise correlation test showed all the variables had a positive and strong relationship with the real GDP except MPR. The Error Correction Model (ECM) showed that MPR, MS and GEXP had significant relationship with the economic growth. Meanwhile real exchange rate and investment rate had no significant effect on the economic growth in Nigeria. Among others, the study recommended that the Central bank of Nigeria should have a legal framework and a guiding money supply control or fiscal policies to ensure effective economic management.