Monetary Policy and Economic Growth Nexus: Further Evidence from Nigeria

This study examined the link between monetary policy and economic growth in Nigeria using data from 2000 to 2017. The study adopted gross domestic product (GDP) as proxy for economic growth and the dependent variable, while broad money supply (BMS), interest rate (INT), cash reserve ratio (CRR), and liquidity ratio (LQR) were used as proxies for monetary policy and the independent variables. Time series secondary data for the variables were sourced from annual reports of Central Bank of Nigeria (CBN) Statistical Bulletins and the Federal Office of Statistics covering the period 2000 to 2017. The study employed descriptive statistics and multiple regression technique based on the E-views 9.0 software as methods of data analysis. The empirical results showed that all the independent variables (broad money supply, interest rate and liquidity ratio) had significant positive effect on gross domestic product, proxy for economic growth except cash reserve ratio which had an insignificant negative link with gross domestic product. On the whole, the findings of this study established that monetary policy had a significant link with economic growth. In other words, monetary policy intervention plays a crucial role in economic growth and development. Based on the findings, the study recommended that monetary policy authorities should ensure general stability in broad money supply, try to maintain a stable interest rate regime as well as stable liquidity position, and put sound monetary policies in place to direct the flow of funds to highly productive sectors to spur growth in the economy and national development.

Keywords: cash; interest; liquidity; money; product