Transmission Mechanisms of Monetary Policy in Nigeria A Dynamic Stochastic Approach
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Date
2011
Authors
Odior, E.S.O.
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Volume Title
Publisher
Business and Management Journal
Abstract
This study examines the role of transmission mechanism of monetary policy in an emerging economy with a rapidly developing financial system. Specifically, we examine whether the central bank of Nigeria monetary policy influence economic activity (output) in Nigeria. Using a SVAR model, impulse response functions and forecast error variance
decomposition analysis was performed to identify the relative strengths of different
channels in transmitting the monetary pulses. The results show that one of the monetary
channels (the reserves and not deposits) is more important than credit channel (loans) and the exchange rate channel. This implies that in less developed financial markets, monetary policy influence economic activity by varying the reserve availability than its loans.
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Citation
Odior, E.S. (2011), “Transmission Mechanisms of Monetary Policy in Nigeria: A Dynamic Stochastic Approach” Business and Management Journal, Vol.1 No. 3, Lagos, Pp, 29 – 35