An Empirical Analysis of Macroeconomic Factors Influencing the Effectiveness of Monetary Policies in Developing Countries: The Case of Nigeria

Abstract

Monetary policies set the pace for the attainment of economic growth, price stability, and reduction in unemployment. The Central banks promote economic expansion through effective monetary policies in order to maintain price stability and sustain the Nigerian economy through its growth path. However, the effectiveness of monetary control and regulations is determined by some key macroeconomic factors that could impede or advance the success of macroeconomic targets and prospects. This literature review article evaluates the implications of these factors such as unemployment, prices changes and economic growth on the monetary policy effectiveness in the Nigerian economy. The study employs the ordinary least square multiple regression technique using data spanning from 1981 to 2018. The findings showed that inflation as a macroeconomic phenomenon significantly affects the effectiveness of monetary policy as measured by variations in the money supply. In all, the study concluded that monetary authorities should capture the implications of variations in outlined macroeconomic variables to ensure the potency of monetary policies in Nigeria. Keywords: Macroeconomic Factors; Monetary Policies; Nigeria DOI: 10.7176/JESD/13-18-04 Publication date: September 30 th 2022