MONETARY POLICY MANAGEMENT AND ECONOMIC GROWTH IN NIGERIA: NEW LESSONS RELEARNED
Abstract:This
research study examines the existing links between monetary policy management
and economic growth in Nigeria within the period 1960-2018. An autoregressive
distributed lag (ARDL) approach was employed to evaluate the cointegration as well
as the short-run and long-run estimates. The findings showed that a long-run
relationship exists between monetary policy and economic growth within the
periods understudied. Concerning the estimated parameters, the results reported
that interest rate, deposit rate and liquidity ratio positively drive short-run
output growth whereas, monetary policy rate, Treasury bill rate, and cash
reserve ratio have a direct impact on short-run output growth in Nigeria.
Meanwhile, in the long-run, monetary policy rate and deposit rate enhance real
income growth, while Treasury bill rate and cash reserve ratio negatively
affect output growth of the Nigerian economy. On the policy front, there is
need for the apex bank to harmonize the expansionary part of the monetary policy
with the contractionary part during the implementation process of the recent
Economic Recovery and Growth Plan (ERGP) in 2017 aimed at turning the slump
situation around and also projecting a strong growth rate in GDP at 4.5%.