Pursuing Sustainable Economic Growth and Prosperity in Nigeria-The Role of Monetary Policy Impulses
Angbas, Jonathan Avreson; Abdulahi, Ahmed & Nimvyap, Nanfa
Department of Economics
Plateau State University, Bokkos
Email: avrenab@yahoo.comABSTRACT: The focus of the paper is to examine the impact of monetary impulse on economic growth in Nigeria using an economic model by proxing the variables of monetary policy instruments to include: Money Supply (MS), Exchange Rate (ER), Interest Rate (IR), and Liquidity Ratio (LR). From our result, two variables (money supply and liquidity ratio) had a positive but fairly insignificant impact on economic growth. Measures of interest rate(-0.65) and exchange rate (-15.77) on the other hand, had a negative but highly significant impact on economic growth which supports the assertion by Busari et al. (2002) that monetary policies are better suited when they are used in targeting inflation rather than in stimulating growth. This is especially so in a developing economy such as Nigeria where the capital market is weak in generating the right impulses to stimulate growth. The policy implication of these findings is that more strategies need to be put in place in order to ensure that monetary and fiscal policies taken jointly positively impacts on economic growth in both the short and long run. The emphasis of monetary authorities should be developing a robust capital market that can provide long term capital to finance growth and development. The study recommends that partial autonomy should be replaced with full autonomy for the central banks in Nigeria which is often subjected to government interference and its politics. Finally, monetary policies should be used to create a favorable investment climate by facilitating the emergency of market based interest rate and exchange rate regimes that attract both domestic and foreign investments
