MONETARY POLICY AND ECONOMIC GROWTH OF NIGERIA: TIME-SERIES EVIDENCE FROM NIGERIA (1981-2022)

Abstract

The study examined the impact of monetary policy on the economic growth of Nigeria; for the period 1981-2022. The study used Gross Domestic Product as a proxy for economic growth and employed it as the dependent variable; whereas, monetary policy rate, Cash Reserve Ratio, Treasury Bills, and liquidity rate respectively were used as the explanatory variables to measure monetary policy. Hypotheses formulated were tested using Autoregressive Distributed Lagged (ARDL) Bound co-integration test ECM. The study revealed that the Cash reserve ratio (CRR) and Treasury Bill Rate (TBR) were positive and statistically significant on Gross Domestic Product in Nigeria. Monetary Policy Rate (MPR) has a negative and is statistically significant to economic growth in Nigeria. While the Liquidity ratio had a negative and insignificant impact on Gross Domestic Product in Nigeria. The ECM result reveals that the error correction term is negative and statistically significant, and this corroborates and shows evidence of a certain return to the short-run equilibrium in the model. Therefore, the study recommends that monetary authorities should give priority attention to CRR and TBR monetary policy tools as they will produce a more desirable result in terms of economic stabilization.