Indirect Monetary Policy and Performance of the Nigerian Economy

Ikechukwu A. Acha & Keto R. Enow

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Abstract

This study was carried out to examine the effect of indirect monetary policy on the performance of the Nigerian Economy from 1993 to 2020. In carrying out the investigation, the researchers made use of various parameters which included real gross domestic product (RGDP) as a variable of economic performance, while open market operations (OMO), monetary policy rate (MPR), cash reserve ratio (CRR) and liquidity ratio (LQR) were used as monetary policy variables. In this study, secondary data were used, while the ex-post facto research design was employed. Multiple regression analyses, unit root tests and co-integration tests were the econometric techniques used for data analysis. The Augmented Dickey-Fuller (ADF) test statistic revealed that the time series properties of the variables were stationary at level, first and second differences. The variables were co-integrated with at least three cointegrating equations for the tested hypothesis. The multiple regression analysis results revealed that indirect monetary policy instruments explained approximately 73 per cent, of total variations in RGDP. The individual variables: OMO, MPR, and CRR were statistically significant to changes in RGDP, while LQR was statistically insignificant. The study found a positive relationship between indirect monetary policy and the performance of the Nigerian economy and further concluded that indirect monetary policy contributed positively to the performance of the Nigerian economy within the period under review.

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