Analysis of the impact of monetary policy shocks on domestic output growth in Nigeria: evidence from dynamic ARDL and VECM tests Online publication date: Thu, 07-Apr-2022
by Paul Terhemba Iorember; Gylych Jelilov; Nargiza Alymkulova; Solomon Gbaka
International Journal of Public Policy (IJPP), Vol. 16, No. 1, 2021
Abstract: The study analyses the impact of monetary policy shocks on domestic output growth in Nigeria from 1981 to 2019, using ARDL and VECM Granger causality. Employing three monetary policy variables of interest rate, broad money supply and exchange rate, the empirical results establish that shocks in money supply have positive impact on domestic output growth in the long-run, while shocks in interest rate and exchange rate have negative impact on domestic output growth in the long-run. Furthermore, the results affirm a unidirectional causality from money supply to real gross domestic product, and from real gross domestic product and interest rate to exchange rate in Nigeria. The study recommends that the use of the interest rate channel in pursuing the goal of output growth should be applied with caution, while the money supply tools should be made more vibrant, towards achieving increased domestic output growth.
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