Prime Lending Rate Research Articles

Economic Sentiment and Market Return of Indian Stock Market: An ARDL Approach

This study investigates the relationship between economic sentiment and the return of the BSE S&P 500 Index over a decade, employing an autoregressive distributed lag (ARDL) model. Using 12 macroeconomic variables as proxies for economic sentiment, the analysis reveals a high degree of correlation between these proxies and market return. The findings demonstrate that market return is significantly influenced by its own lags, economic corporate premium (ECORPREM), foreign direct investment (FDI), gross domestic product (GDP), inflation rate (INFLAT), prime lending rate (PLR), and short-term interest rate (SHORTINT). Specifically, market return shows both positive and negative correlations with its various lags, while ECORPREM, FDI, GDP, and SHORTINT exhibit significant relationships with market return at different lag intervals. Additionally, INFLAT positively influences market return at specific lags, and PLR is positively correlated with market return in the current period. The study identifies that ECORPREM, FDI, GDP, INFLAT, PLR, and SHORTINT, with -values below 0.20, are statistically relevant in explaining market return. Conversely, variables such as exchange rate (EXRATE), foreign exchange reserves (FEXRES), index of industrial production (IIP), liquidity in the economy (LIQECO), oil prices (OILPRICE), and terms of trade premium (TERMSPRE) do not significantly impact market return, as indicated by their higher -values. These results provide valuable insights for retail investors, policymakers, and other stakeholders in refining their decision-making processes in the Indian stock market. The study also challenges the classical finance theory of investor rationality, suggesting avenues for further research in international contexts.

Micro, Small and Medium Enterprises and Sustainable Economic Development in Nigeria

Sustainable economic growth and development may practically be impossible if the indices of growth are not given the required attention that will translate into an enviable sustainability of the fabrics of growth in Nigeria. This has become important given the decline in micro, small and medium enterprise subsector in Nigeria. The essence of this research is thus, to empirically examine the impact of micro, small and medium enterprises on sustainable economic development in Nigeria. The study covered from 2000 to 2020 and annual time series data were sourced from the CBN Statistical Bulletin, World Development Indicator (WDI) and National Bureau of Statistics (NBS). The co-integration and ECM frameworks were used. The results showed that the output of micro, small and medium enterprises has a significant and positive impact on the Per Capita Income (PCY), the exchange rate (EXR) has a significant and positive impact on the micro, small and medium enterprises and Prime Lending Rate (PLR) has a negative and insignificant impact on the micro, small and medium enterprises. Thus, from the results, it was recommended, amongst others, the clustering of micro, small and medium enterprises with similar products, to further improve their output and development process vis-a-vis the growth and development of Nigeria.

Extension and Revision of Monetary Policy Transmission Mechanisms and Domestic Real Investment in Nigeria: A Time Series Study Between 1981-2015 by Lucky Anyike Lucky & Uzah Cheta Kingsley.

The study by Lucky Anyike and Uzah Cheta Kingsley examines the impact of monetary policy on domestic real investment in Nigeria, using Gross Fixed Capital Formation to Gross Domestic Product ratio as a proxy for domestic real investment. The study uses various independent variables, including the maximum lending rate, credit to private sector as a percentage of GDP, naira to US dollar exchange rate, savings rate, monetary policy rate, prime lending rate, and Treasury bill rate. The authors conclude that monetary policy has a significant effect on the domestic real investment rate. The extension of this paper examines the impact of both monetary and fiscal policy on domestic real investment in Nigeria, while also considering the influence of political biases and the fact that a significant portion of fiscal policy spending may be allocated to current expenditures rather than capital expenditures. While mainstream economic theory suggests that fiscal policy should have a positive effect on real investment rate, this theory may be challenged in Nigeria due to the specific context and allocation of fiscal resources. We also examine the effect of monetary policy on domestic real investment rate in Nigeria by incorporating additional variables in our analysis.

Extension and Revision of Monetary Policy Transmission Mechanisms and Domestic Real Investment in Nigeria: A Time Series Study Between 1981-2015 by Lucky Anyike Lucky & Uzah Cheta Kingsley

The study by Lucky Anyike and Uzah Cheta Kingsley examines the impact of monetary policy on domestic real investment in Nigeria, using Gross Fixed Capital Formation to Gross Domestic Product ratio as a proxy for domestic real investment. The study uses various independent variables, including the maximum lending rate, credit to private sector as a percentage of GDP, naira to US dollar exchange rate, savings rate, monetary policy rate, prime lending rate, and Treasury bill rate. The authors conclude that monetary policy has a significant effect on the domestic real investment rate. The extension of this paper examines the impact of both monetary and fiscal policy on domestic real investment in Nigeria, while also considering the influence of political biases and the fact that a significant portion of fiscal policy spending may be allocated to current expenditures rather than capital expenditures. While mainstream economic theory suggests that fiscal policy should have a positive effect on real investment rate, this theory may be challenged in Nigeria due to the specific context and allocation of fiscal resources. We also examine the effect of monetary policy on domestic real investment rate in Nigeria by incorporating additional variables in our analysis.

Extension and Revision of Monetary Policy Transmission Mechanisms and Their Impact on Domestic Real Investment in Nigeria: A Time Series Study from 1981 to 2015 by Lucky Anyike and Uzah Cheta Kingsley

The study by Lucky Anyike and Uzah Cheta Kingsley examines the impact of monetary policy on domestic real investment in Nigeria, using the Gross Fixed Capital Formation to Gross Domestic Product ratio as a proxy for domestic real investment. The study uses various independent variables, including the maximum lending rate, credit to the private sector as a percentage of GDP, the naira to US dollar exchange rate, the savings rate, the monetary policy rate, the prime lending rate, and the Treasury bill rate. The authors conclude that monetary policy has a significant effect on the domestic real investment rate. The extension of this paper includes an examination of the impact of fiscal policy on domestic real investment in Nigeria, while also considering the influence of political biases and the fact that a significant portion of fiscal policy spending may be allocated to current expenditures rather than capital expenditures. While mainstream economic theory suggests that fiscal policy should have a positive effect on the real investment rate, this theory may be challenged in Nigeria due to the specific context and allocation of fiscal resources. We also examine the effect of monetary policy on the domestic real investment rate in Nigeria by incorporating additional variables in our analysis.

CASH CRUNCH AND THE NIGERIAN ECONOMY

This study examined cash crunch and the Nigerian economy. To achieve this objective, relevant data used spanning from 1981-2022 were obtained for the review period from the Central Bank of Nigeria (CBN) Statistical Bulletin and World Bank Indicators. Descriptive statistics, Augmented Dickey Fuller (ADF) Unit root test, Granger causality and Ordinary Least Square (OLS) regression were the analytical tools for this study. Real Gross Domestic Product growth rate (RGDPgr) was used as the dependent variable, while Cash crunch proxy with prime lending rate (CC), Domestic credit by Banks to private sector (DCBPS), Loan to deposit ratio (LDR), Inflation Rate (INFR), Money supply growth rate (MSgr) as the independent variables. Based on the analysis, there exist positive relationship between RGDPgr, CC, DCBS, LDR, and M2gr and a negative relationship existed RGDPgr and INFR. The F-statistic of the regression output stood at 6.208930, this implies that the regression plane is statistically significant. It was also, revealed that cash crunch had negative and significant effect on the Nigerian economy C = -11.97721, P < 0.05 (0.0265 < 0.05), while the overall Prob.(F-Statistic) 0.000302 is less than the 0.05 level of significance implies that there is a statistical significant relationship between the variables. R2= 0.463044 implies that about 46.30% of the total variation in the model specified was accounted for by the independent variables. LDR is platykurtic, RGDPgr, CC, DCBPS, INFR and M2gr are leptokurtic, according to the descriptive analysis, which also showed that all the variables were normally distributed; All the variables were stationary and significant at their respective values. There is the existence of a long-run relationship between the variables indicated by Johansen co-integration equation. Therefore, cash crunch has negative effect on investment in an economy. In conclusion, cash crunch had negative and significant impact on the expansion of Nigerian economy for the period studied. The study recommended that the government through CBN should modified most of its tools and incorporate some of the macro prudential variables in its dealings so as to have robust grips of the economy with the intention of suppressing the adverse effect of inflationary pressure in the economy.
 Keywords: Cash Crunch, Domestic Credit By Banks To Private Sector, Inflation, Money Supply And Nigerian Economy.

Regulatory Intervention Effectiveness and Performance of Financial Institutions in Nigeria.

Deposit Money Banks have over the years made good contributions to Nigeria’s economic development. However much remains to be done as various regulatory interventions implemented to ensure safe and sound financial services delivery have not achieved the expected results as Nigerian banks still carry poor credit portfolios, illiquidity, weak asset quality, and high interest rates and this may be attributed to sub-optimal increase in asset base, increasing loan loss provision, huge non-performing loan, poor earnings of non-interest income and return on assets. This study adopted ex-post facto design using multiple regressions estimation techniques to analyse the data which was extracted from annual financial statements of three (3) foremost DMBs in Nigeria (UBA, FBN and GTB). The study revealed that combined variations in the institutions intervention effectiveness (shareholders fund, reserve requirements, statutory reserve, asset quality and prime lending rate) have resulted into 60% changes in all the explanatory variables of bank performance. It is therefore recommended that the CBN should be more proactive in the exercise of their regulatory intervention functions when an indication emerges that any of the banks’ are experiencing liquidity crisis to avoid systemic distress in the banking industry as intermediation of funds can get disrupted and liquidity challenges turn into reputational damage.

Effect of Interest Rate on Savings Mobilization in Nigeria

The study examines the extent at which interest rate affects savings mobilization in Nigeria. The study is hinged on the modified variant of McKinnon and Shaw hypothesis that accounts for the link between savings mobilization and interest rate. ARDL model was used in the study to test for co-integration for the long run and the unrestricted error correction model for the short run contemporaneous dynamics. Data gotten from CBN annual report and World Economic Outlook covers the period; 1986-2022 was used for the study. Accordingly, the study finds out that savings mobilization is significant but have negative responsive to changes in nominal interest rate both in the short run and long run. Also, the study further finds out that the effect of prime lending rate on savings mobilization is significant but has positive response in long run as against its significant negative effect in the short run. Thirdly, it was observed that maximum leading rate had significant positive effect on savings mobilization in the short run while inflation rate exerted significant negative effect on savings mobilization contrary to the latter significant positive response to changes in M2-GDP ratio in the short run. The study recommended the need for government to consider a reduction from the current double digit to single digit particularly in nominal interest rate and prime lending rate in order to stimulate savings through investment in Nigeria. Finally, monetary authorities may consider a moderation rise in price level thereby encouraging people to save.

Agricultural credit guarantee scheme fund and oil palm production in Nigeria: A vector autoregressive (VAR) approach

Oil palm has been identified as one of the key agricultural products that can diversify Nigeria’s economy. However, its production and export have been hampered by capital constraints. Consequently, the Agricultural Credit Guarantee Scheme Fund (ACGSF) was introduced to encourage lending to farmers and agro-processors to enhance agricultural productivity. Therefore, this study aims to determine the effectiveness of ACGSF allocations to the oil palm production subsector. Time series data on oil palm production, as well as data on ACGSF allocations to oil palm and cash crop production, prime lending rate and commercial banks' loans to agriculture were obtained from FAOSTAT and the Central Bank of Nigeria. Vector autoregression, Granger causality and impulse response functions were used to estimate the short-run relationship. The results reveal that ACGSF allocations to the oil palm subsector and commercial banks’ loans to agriculture have negative and positive effects, respectively, on oil palm production. There was unidirectional causality from ACGSF and commercial banks to agriculture to oil palm production. The findings suggest expansion and close monitoring of the ACGSF scheme, and the intensification and esterification of oil palm production. The study shows that estimating the effect of ACGSF on overall agricultural productivity does not provide deep insight into commodity-specific credit packages.

Analysis of the Influence of Third Party Fund Composition, BI Rate, and Firm Size on Corporate Loan Prime Lending Rate

Abstract
 The purpose of this study is to ascertain if the basic credit interest rate (SBDK) for corporate credit in banking businesses listed on the Indonesia Stock Exchange in 2018–2021 is influenced by the TPF composition, the BI-7 Day Reverse Repo Rate (BI Rate), and the size of the company. This study employed secondary data for its data collection. Publications representing the completed version of the data are acquired. Regression coefficient research indicates that the factors related to current accounts and business size are negative, but the variables related to savings, deposits, and BI Rate are positive. Joint hypothesis testing results indicate that the basic credit interest rate is influenced by the size of the company, the BI Rate, and the makeup of third-party funds. The basic credit interest rate is influenced by the BI Rate and company size, but not by the makeup of third-party funds. The value of R square is 0.271. This demonstrates how the BI Rate, the size of the company, and the makeup of third-party funds affect the basic credit interest rate by 27.1%, with other factors influencing the remaining amount. 
 
 Abstrak
 Penelitian ini bertujuan untuk mengetahui apakah komposisi DPK, BI-7 Day Reverse Repo Rate (BI Rate), dan ukuran perusahaan berpengaruh terhadap suku bunga dasar kredit (SBDK) kredit korporasi pada perusahaan perbankan yang terdaftar di Bursa Efek Indonesia. pada tahun 2018 – 2021. Data yang digunakan dalam penelitian ini adalah data sekunder. Data yang diperoleh sudah dalam bentuk jadi berupa publikasi. Hasil penelitian koefisien regresi variabel transaksi berjalan dan ukuran perusahaan bernilai negatif, sedangkan variabel tabungan, deposito dan BI Rate bernilai positif. Hasil pengujian hipotesis bersama menunjukkan bahwa komposisi dana pihak ketiga, BI Rate, dan ukuran perusahaan berpengaruh terhadap suku bunga dasar kredit. Secara parsial BI Rate dan ukuran perusahaan berpengaruh terhadap suku bunga dasar kredit, sedangkan komposisi dana pihak ketiga tidak berpengaruh. Nilai R square sebesar 0,271. Hal ini menunjukkan bahwa komposisi dana pihak ketiga, BI Rate, dan ukuran perusahaan berpengaruh terhadap suku bunga dasar kredit sebesar 27,1% sedangkan sisanya dipengaruhi oleh faktor lain.

The Effects of Monetary Policy on the Contributions of Banks’ Lending to Economic Performance in Nigeria

Monetary policy typically focused on economic performance, price stability, and external balance (Balance of Payments Equilibrium), among other things. The study's goal is to look at how banks contribute to Nigeria's economic performance through lending. The study used an econometric method to examine the impacts of monetary policy on bank lending contributions to economic performance, using Augmented Dickey Fuller (ADF), unit root test, and regression analysis as estimation techniques. Broad money supply, monetary policy rate, prime lending rate, and inflation rate were used as monetary policy indicators, whereas real gross domestic product was used as an economic performance metric. The information utilized came from the Nigerian Central Bank's Statistical Bulletin and the National Bureau of Statistics. Statistical evidence from the result regression outcome revealed that banks’ lending, money supply, monetary policy rate have positive contributions to economic performance in Nigeria while inflation rate contributed positively but insignificant to economic performance in Nigeria during the studied period. The result findings further strengthen and accommodate more investment and lucrative projects into the economy which on the long run will provide job creation, reduce unemployment, reduce poverty level and contribute to the economic development of Nigeria if put onto use. The study therefore concluded that monetary policy has positive contributions to banks’ lending towards Nigeria economic performance. It was recommended that the CBN needs to supervise thoroughly the banks’ activities to enable them comply with all the legal regulatory frameworks and monetary policies. Not that alone, the design of monetary policy and its implementation should be made in such a way that the conflict of target is avoided.

Pengaruh Jumlah Inflasi dan Nilai Tukar terhadap Penyaluran Kredit UMKM Melalui Suku Bunga Dasar Kredit

In this study, a research was conducted to examine how the influence of the amount of inflation and the exchange rate on MSME lending through the Basic Loan Interest Rate. The data used in this study is secondary data obtained from data from Bank Indonesia and BPS RI. The research method is carried out using path analysis with the intervention variable being the basic loan interest rate. Data processing is done with the help of IBM SPSS. The results of this study indicate that inflation has a positive and not significant effect on the prime lending rate, whereas the exchange rate has an insignificant negative effect on the prime lending rate. Inflation and exchange rates have a positive and insignificant effect on total MSME loans, while the SBDK has a significant negative effect on total MSME loans. The prime lending rate does not mediate inflation and exchange rates in influencing MSME credit.

Macroeconomic Variables That Influence the Determination of Interest Rate: Evidence from Sri Lanka

The interest rate is one of the main tools used to governor monetary policy in Sri Lanka. The main objective of this research was identifying the Macroeconomic variables that Influence to determine the Interest Rate: Evidence from Sri Lanka. Changes in macroeconomic variables affect to determine interest rate. At present, there are some consensus on the answers to these questions. This paper examines to identify Macroeconomic variables that influence the determine the interest rate in Sri Lanka and identify the relationship between interest rate and macro-economic variables. The model of this study was estimated using quarterly data from 2004:Q1 to 2015:Q4. This study uses Macro-economic variables such as money supply, budget deficit, inflation, and economic growth. This study uses Average Weighted Prime Lending Rate (AWPR), and 3-month T bill rate as benchmark interest rates in Sri Lanka. Variables were initially tested for stationery and autocorrelation, and both inflation and budget deficit were found as non-stationary, the first difference of these variables was considered. There was no autocorrelation amongst any of the variables. Granger causality tests use for finding the interrelationships between the variables in the model. looking at the overall models, it was seen that both models was significantly represented by their F-values, only the first difference of inflation and real GDP were significant in both models. There was no direct causation of interest rates from changes in inflation and real GDP. It was observed that collectively both money supply and budget deficit had a significant impact on the level of interest rates. The R-squared values are in the range of 25%. The conclusion of the study is the explanatory variables are weakly affected to determining interest rates in Sri Lanka during the reference period. Further found that all the macro-economic variables showed a positive linear relationship with the T bill rate and AWPR in Sri Lanka.

The effect of selected macroeconomic policies on citrus price volatility in South Africa: A reflection on experiences of farmer support

The macroeconomic policies enacted by the South African government after democracy and their effects on the welfare of resource-poor farmers remains a subject of scholarly interest. It is not known if farmers are cushioned against exogenous macroeconomic shocks. The aim of this study was to analyse citrus price volatility in National Fresh Produce Markets and to study the effects of macroeconomic policy shocks. Secondary data for prices was sourced from the Johannesburg National Market. GARCH was employed as an empirical model to estimate price volatility. According to the results, price volatility for lemon and soft citrus is statistically insignificant. Price volatility for oranges was statistically significant at a 99% persistence level (α = 0.39, p = 0.0030) and (β = 060, p = 0.0000). The exchange rate (α = 0.05, p = 0.0000), CPI (α = –0.26, p = 0.0035) and prime lending rates (α = 0.12, p = 0.0026) were significant in explaining price volatility in oranges. Added values of the coefficient of α and β for Grapefruit amounted to 1.1, which means the price volatility was explosive. High levels of price volatility mean farmers are faced with the difficulty of projecting expected levels for farm income and profitability. The results provide insights into farm planning and decision making. It is recommended that the government provide farmers with resources that can cushion against price instability and enable them to access export markets.

DAMPAK INKLUSI KEUANGAN TERHADAP RISIKO KREDIT PADA PERBANKAN DIGITAL DI INDONESIA PERIODE TAHUN 2015-2021

One of the most significant risks for banks, including digital banks, is credit risk. Bank credit risk can be influenced by a number of things, one of which is increasing financial inclusion. Then there is the prime lending rate which is used as a variable control in this study. The purpose of this study is to identify and analyze the impact of financial inclusion on credit risk in Indonesian digital banks. This study employs panel data from four Indonesian digital banks from 2015 to 2021. Panel data regression is the regression model that was used, and the hypothesis was tested with the t test, the F test, and the coefficient of determination. Financial inclusion has a positive and insignificant effect on digital bank credit risk in Indonesia on the accessibility dimension, a negative and significant effect on the usage dimension, and for prime lending rates it has a positive and insignificant effect on digital bank credit risk in Indonesia. This indicates that digital banks in Indonesia can reduce their credit risk by utilizing financial services. So that increasing financial inclusion through the use of financial services must be further improved while still paying attention to the prudence principle.

DETERMINAN SUKU BUNGA DASAR KREDIT (SBDK) SEKTOR KORPORASI PADA BANK BUKU 4

This study aims to determine the factors that determine the Prime lending Rate (SBDK) in the Corporate Sector at Bank BUKU 4. In this study, the researchers used these variables from seven Book 4 banks for the 2015-2019 Period in the case of the corporate sector prime lending rate. Therefore, this research data is panel data obtained from the Indonesian Banking Statistics (SPI) published by BI. Data processing is carried out using the Econometric Model of Panel Data Regression Analysis and Eviews 9.0 as processing instruments. Based on the results of data processing, it was found that the model used was Fixed Effect with the ability of independent variables (liquidity, capitalization, lending out ratio, credit risk, and efficiency) to be able to explain the dependent variable prime lending rate (SBDK) of 56.05%. However, the regression coefficient shows that only NPL and BOPO have a significant effect on the SBDK. In other words, only the level of bad loans and banking efficiency have a significant effect on the prime lending rate.

Mediating Role of Industrial Output on the relationship between Monetary Policy and Inflation in Nigeria

obtained from CBN statistical bulletin from 1990Q1 to 2019Q4. Monetary policy was proxied by monetary policy rate (MPR), prime lending rate (PLR), maximum lending rate (MLR), and treasury bills rate (TBR). The study employed Structural Equation Modelling (SEM) in analysis. It was found that monetary policy rate, prime lending rate, maximum lending rate, and treasury bills rate impacted positively on inflation in Nigeria. It was also found that industrial output impacted negatively on inflation, implying that an increase in industrial output will lead to a reduction in inflation in Nigeria. The study also found that industrial output played a partial mediation on the relationship between prime lending rate (PLR), maximum lending rate (MLR), and inflation but a complete mediation was found for industrial output on the relationship between monetary policy rates (MPR), treasury bills rate (TBR) and inflation in Nigeria. The study concluded that when industrial output is used as a mediator variable, on the relationship between monetary policy and inflation; monetary policy can effectively reduce inflation indirectly by boosting industrial output or production. The study recommends that to achieve the monetary policy objective of price stability, the monetary authority should reduce MPR, PLR, MLR, and TBR to boost industrial output, as industrial output has the potential of reducing the inflation rate in Nigeria.

Monetary policy and unemployment rate in Nigeria: An empirical investigation

The study investigated the impact of monetary policy on unemployment rate in Nigeria. Time series data spanning from 1981 to 2020 was sourced from the Central Bank of Nigeria statistical bulletin and national bureau of statistics (various editions). The ARDL bounds testing approach to co-integration was used to analyse the data. Autoregressive Distributed Lag (ARDL) model and Error Correction Model (ECM) were utilized to address the main objectives of the study. The estimated short run coefficient result revealed that prime lending rate has a positive and insignificant impact on unemployment rate while that minimum rediscount rate has a negative and insignificant impact on unemployment rate. The speed of adjustment for correcting disequilibrium from the previous year to equilibrium in current year is 81.9 percent as shown by the coefficient of ECM. The long run result of the study showed that there is a positive and significant impact between prime lending rate and unemployment rate in Nigeria but a negative and significant impact between minimum rediscount rate and unemployment rate in Nigeria. The run result equally revealed that there is a positive and insignificant impact between exchange rate and unemployment rate in Nigeria. Based on these findings, the study recommended that the monetary authority should come up with policies that will reduce minimum rediscount rate as this will encourage borrowing of funds for investment purposes as this will help to reduce unemployment rate. Monetary authorities should also come up with policies that will stabilize exchange rate.

Modeling the Effect of Monetary Policy on Commercial Bank’s Lending Operation in Nigeria using Vector Error Correction Model (1991- 2020)

The study examines the effect of monetary policy on commercial bank’s lending operation in Nigeria between February, 1991 to October, 2020 using the macroeconomic time series variables of exchange rate, interest rate, maximum lending rate and prime lending rate. The vector error correction model was employed to analyze these interactions as well as the effect and pattern of causality among the variables under investigation. Monthly data spanning from February, 1991 to October, 2020 which covered a period of 29 years and 7 months (357 observations) were sourced from the Statistical Bulletin of the Central Bank of Nigeria (CBN). Preliminary statistical approach such as descriptive statistics and time plot were carried out to test if the data set obey the normality assumption and to verify if there is trend on the series. Pre-estimation diagnosis such as unit root test, lag order selection criteria and co-integration test were carried out and the results shows that at level, all variables had unit root, then, at first difference all variables were stationary. The lag order selection criteria chose lag 3 (14.7844*) of Akaike information criteria, but the vector error correction model (VECM) was done at lag 2 indicating losing a lag. The co-integration test shows the presence of long run relationship among the variables. The vector error correction model (VECM) estimated from the results obtained shows that all the variables had positive effect on commercial bank’s lending operation. The post estimation test on vector error correction model such as normality of the residuals, serial correlation and heteroscedasticity shows that the VEC model was multivariate normal, no serial correlation and homoscedastic. The inverse root of AR characteristic polynomial shows that the estimated VECM satisfy the stability condition of the diagnostic test. The variance decomposition test shows that the variables have a very weak influence in predicting one another. Recommendations were made based on the result of findings in the study

MONETARY POLICY AND AGRICULTURAL SECTOR PERFORMANCE IN NIGERIA: A GRANGER CAUSALITY APPROACH

Purpose: The agricultural sector provides a formidable basis for the Nigeria’s economic diversification. To achieve this in the short-run, to start with, the use of appropriate monetary policy instruments is indispensable. Hence, this study examined the short-run causality between monetary policy and agricultural sector performance. Methodology: Time series data for the study were obtained from the Central Bank of Nigeria between 1981 and 2020. The monetary policy instruments in the model were money supply (MS), monetary rediscount rate (MR), exchange rate (ER), prime lending rate (PR) and agricultural sector implicit price deflator (ASI) while agricultural sector performance was proxied by the gross domestic product for the sector. After first differencing, the Augmented Dickey-Fuller test confirmed the stationarity of the variables. Optimal lag selection-order recommended four lags. The vector autoregressive model, pairwise Granger causality test and Wald coefficient test were used to show the robustness and validation of the causality test. Findings: The result shows that the t-statistics of LnMS (2.70), LnMR (3.00), LnER (2.05) and LnPR (3.53) were statistically significant (p<0.05), suggesting bidirectional relationship between monetary policy and agricultural sector performance. There was a unidirectional causality running from LnASI to LnASG. It was concluded that monetary policy Granger-caused agricultural sector performance in the short-run. Unique contribution to theory, policy and practice: The study recommended that monetary authorities should note that that changes to MS, MR, ER, PR and ASI would affect ASG and vice versa in the short-run as well as the overall macroeconomic growth; and policy decisions that are aimed at altering ASG would affect MS, MR, ER, PR.