SOCIALSCI JOURNAL

Does Monetary Policy InduceEconomicGrowth? An Empirical Evaluation of the Nigerian Economy

Abstract

AnthonyIlegbinosaImoisi

The goal of every economy is to attainthe highest level of economic growth and development. Monetary and Fiscal policies areinstrumentswhichthe government of any nation can employ to effectively achieve the desired growth of their respective economies.This studyinvestigates the extent to whichmonetary policies can promoteeconomic growth in Nigeria, covering the period of 1980-2016. In doing this,the study usedsecondary data from the CentralBank of Nigeria Statistical Bulletinsand National Bureau of Statisticsvarious issues. The econometric technique of ordinary least square (OLS), Johansen co-integration and the vector error correction model (VECM)were employedin analyzing the data collected for this study. The result showedthat monetary policies did not have a significant impact on Nigeria’s economic growth in the short run, but significantly affected the country’s growth in the long run.The non-significanceof the nation’s monetary policies on economic growth in the short run is a strong proof of the gap between monetary policies formulation and implementation in Nigeria. Thus,it isrecommended thattheCentral Bank of Nigeria should ensure to bridge the gap between monetary policy formulation and implementation. Furthermore, monetary policies should be employed to create favourableinvestment climate by aiding the emergence of market-basedinterest rate and exchange rate thatwill bring in both domestic and foreign investments.Finally, the Central Bank of Nigeria and the Federal Ministry of Finance should ensure there is efficient coordination of monetary and fiscalpolicies to spur economic growthin Nigeria.