Macroeconomic variables serve as economic indicators that offer valuable insights into the overall health and stability of an economy. Changes in these variables can have significant impacts on a country's trade balance and overall economic performance. This study employed multivariate time series analysis to study the relationship between Merchandise Trade Flows (MTF), Monetary Policy Rate (MPR), Commercial Lending Rate (CLR), Nominal Growth Rate (NGR) and Consumer Price Index (CPI) with Money Supply (MoS) as exogenous variable. The nature of trend in each series was investigated. The results revealed that quadratic trend model best models MTF, MPR, CLR and NGR whiles an exponential trend best models CPI. Johansen’s co-integration test with unrestricted trend performed revealed the existence of long-run equilibrium relationships between the variables and three (3) co-integrating equations described this long-run relationship. In terms of short-run relationships, the VEC (2) model revealed that, CLR, NGR, MoS have positive and significant impact on MTF. CLR, NGR and MoS have positive and significant impact on MPR, NGR have positive and significant impact on CLR, CPI and MoS have significant impact on NGR whiles NGR and MoS have significant impact on CPI. Model diagnostics performed on the VEC (2) model showed that, all the model parameters are structurally stable over time and the residuals of the individual models are free from serial correlation and conditional heteroscedasticity. Forecast error variance decomposition (FEVD) analysis showed that each variable primarily explained its own variance and the influence of other variables increase over time. Hence, adopting a broad perspective on macroeconomic variables can help policymakers anticipate and mitigate ripple effects across various economic sectors.
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