Empirical Analysis of the Role of Money Market Instruments on Economic Growth in Nigeria: 1994-2018

Abstract

This study investigate the role of money market on economic growth in Nigeria, from 1994 to 2018. It employed the Autoregressive Distributive Lag (ARDL) Bound Testing approach and the result shows that there is long-run relationship among the money market instruments. It also revealed that the money market variables have negative but significant impact on economic growth both in the long-run and in the short-run, except for commercial paper which has positive impact on economic growth, though not significant. This study therefore recommended that since treasury certificate has proven to have the most influential impact on economic growth, central bank should give priority to it. Furthermore, the players, which are the savers and the investors should be encouraged to invest more on the treasury certificate by making it more attractive through appropriate and relevant incentives. The monetary authority should introduce innovative policies into the Money market for it to contribute positively and significantly to economic growth. In addition, interest rate as a major determinant in Money market operations should be well positioned in order for it not to tilt in favour of one of the players in the market thereby discouraging other players from investing in the instruments.