Abstract
The inability of most developing economies to use monetary policy to engender real economic growth in their countries prompted the researchers to empirically assess the impact of monetary policy on economic growth in Nigeria between 1980 and 2014. The study employed an econometrics approach making use of the ADF unit root test, Johansen cointegration, Vector error correction model, Pairwise granger causality test and variance decomposition. The Vector Error Correction Mechanism result shows a positive short and long run relationship between both narrow money supply and broad money supply and economic growth in Nigeria with model strength of 75%. The Pairwise granger causality test shows a bi-directional causality between broad money supply and economic growth in Nigeria and was statistically significant at 5% level of confidence. Recommendations were for the government to use her contractionary monetary efforts and implement relevant policies to curtail the inverse effect of the persistent variation in the value of exchange rate, price level and interest rate in Nigeria and adequate regulation of the quantity of money in circulation to avoid hyperinflation and other unpredictable monetary volatilities.
Highlights
It is not quite easy to define monetary policy due to differences in the level of financial development of most economies
All the monetary aggregates that constitute the three puzzles, money supply, interest rate, inflation rate and exchange rate are both incorporated into a dynamic Vector Error Correction Model (VECM) to examine in totality, the real effects of monetary policy on economic growth in Nigeria
The primary model showing the technical relationship between monetary policy proxied by narrow money supply (M1) and broad money supply (M2) and real gross domestic product (RGDP) as a proxy for economic growth in Nigeria was specified : RGDP = F (NMS + BMS) (1)
Summary
It is not quite easy to define monetary policy due to differences in the level of financial development of most economies. The general objective is to ensure price stability, maintenance of external balance, reduction of unemployment, growth in output, and sustainable growth and development (Folawewo and Osunbi, 2006) These are long run economic growth measures that are necessary for the attainment on internal and external balance for an economy. This long run inverse relationship between inflation and unemployment is popular in economic literature called the Philips curve (Jhingan, 2006). Government issues out incentives and the use of open market operations to boost the purchasing power of the people or business companies (Miller, 2000)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
