ASSESSING THE INFLUENCE OF MONETARY POLICY TOOLS ON EXTERNAL CREDIT - ECONOMIC GROWTH NEXUS IN NIGERIA
Oluwasogo S. Adediran1*, Emmanuel O. George2, Philip O. Alege3
1Department of Economics & Development Studies, Covenant University, Ota, Nigeria.
2Ph.D., Department of Economics, Olabisi Onabanjo University, Ago-Iwoye, Nigeria.
3Ph.D., Department of Economics & Development Studies, Covenant University, Ota, Nigeria.
The Nigeria economy attracts abundance of foreign capital inflows and credit supply, as a result, an adverse external credit shock might bring a large decrease of external inflows due to global credit tightening, which may leave the domestic economy in deep recession. In this case, monetary policy tools may be preferred to stimulate investment. However, an important issue of concern in this study is, how does monetary policy mitigate the effect of external credit shocks on economic growth in Nigeria? Hence, in answering this question, it was imperative for the study to assess the influence of monetary policy on external credit and economic growth nexus in Nigeria. Using annual data covering thirty-six years for the period 1980-2015. The study adopted the neoclassical growth model and estimated the model using Autoregressive Distributed Lag (ARDL) approach. The study expressed that cash reserve requirement, which is credit policy easing is significant in growing the Nigerian economy, as compared to monetary policy rate. The implication of this is that, if credit policy easing is properly implemented, it could be efficient in offsetting adverse external credit shocks.
Keywords: Monetary Policy, Economic Growth, Capital Inflows, Credit Supply and Autoregressive Distributed Lag (ARDL).
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