Rethinking the Economic Development Implications of Trinity Policy Trade-offs in Nigeria: A Focus on GNI Per Capita Growth

Abstract

This study deepens the understanding of the dynamic relationship between trinity policy trade-offs and GNI per capita in Nigeria between 1980 and 2020. The external reserve is introduced to the empirical model in recognition of its role in stimulating the effectiveness of trinity policy goals. Data for the variables were sourced from the National Bureau of Statistics, CBN Statistical Bulletin and World Bank World Development Indicators (WDI) among others. Descriptive statistics, Phillips-Perron unit root test, bounds cointegration and ARDL model as well as Tado-Yamamoto causality form basis for data analysis. The unit root test results reveal that the variables are mixed integrated. This necessitates the application of the bounds cointegration test. As observed from the results, a long-run relationship exists between GNI per capita and trinity policy indexes. It was found from the ARDL estimates that monetary autonomy and capital mobility have a significant positive effect on GNI per capita in both the short and long run. This suggests that more monetary policy sovereignty and openness of the financial architecture yield positive benefits of improved living standard. The result further showed evidence of long-run causality flowing from external reserve to GNI per capita. This finding explains why policymakers in Nigeria have continued to prioritize external reserve build-up for sterilized intervention and stimulating policy effectiveness. Given the findings, this study recommends that policymakers should strive to maintain appreciable monetary autonomy and gradually collapse restrictions on cross-border capital flows to improve economic well-being in Nigeria.