Nexus of Monetary Policy and Economic Growth in Nigeria

Abstract

This missing link in transmission mechanism calls for a system of equation which constitutes gap for proper model building. The study examines the nexus of monetary policy and economic growth in Nigeria using secondary data sourced from CBN statistical bulletin from 1981 to 2022.  Two stage least square (2SLS) model was adopted to analyze the responses of monetary policy tools such as monetary policy rate, treasury bills exchange rate, cash reserve ratio, etc.  The results of indicates that Monetary Policy Rate (MPR) exert inverse and insignificant effect on Real GDP, Cash Reserve Ratio (CRR), Treasury Bill Rate (TBR) and exchange rate as well are positive but insignificant to the real GDP of the economy. This study suggests a prudent management and administration instruments of monetary policy in order to impact significantly on the general interest rate which has inverse rate which has relationship on investment that positively impact significantly on the real growth of the economy.