Cross-Border Transmission of Interest Rate Shocks: A VAR Analysis of the Nigerian Economy

This paper examined if interest rate shocks from the U.S are transmitted to Nigeria. For this purpose, we collected data on four Nigerian variables (real GDP, CPI, exchange rate and interest rate) and two foreign variables (U.S FFR and the world CPI) for the period 1983-2011. The impulse response analysis of our VAR model shows that Nigerian variables respond insignificantly to shocks from foreign variables. We therefore concluded that shocks in Nigeria are basically home-made.  We recommended that monetary authorities in Nigeria should base their policy making on domestic shocks, as considering external factors might mislead them. Keywords: Interest rate shock, International transmission, Nigeria, U.S.A., VAR

A Survey of Studies on Money Demand and Inflation Amidst Banking Crisis

The paper is borne out of the necessity to create a repository of information on monetary effects of banking crisis with a focus on money demand and inflation. To this end, the paper selectively reviews some empirical studies on money demand and inflation in the face of banking crisis. Overwhelming evidence reveals that money demand does not only increase during banking crisis but is also largely stable. The studies also suggest that long-run cointegrating relationship exists between money demand and its determining variables during banking crisis. However, evidence indicates that banking crisis makes inflation to decline or increase. These pattern of results were evident in developed and developing countries and from different methodologies applied. One policy implication from the survey is that during banking crisis monetary policy would be ineffective. The policy recommendation that can make monetary policy effective is to expand money supply and reduce interest rate for the productive sectors, particularly agricultural and manufacturing sectors

TESTING THE VALIDITY OF KEYNESIAN LIQUIDITY PREFERENCE THEORY AND VELOCITY OF MONEY DEMAND FUNCTION IN NIGERIA

The essence of this study is to test the validity of Keynesian Liquidity Preference theory as well as the velocity of money demand in Nigeria using annual time-series data covering between 1970 and 2014. The stationarity of the data was ascertain using both Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests, and the result reveal that apart from interest rate, all the variables are stationary at first difference. Data were analyzed using Ordinary Least Squares (OLS) estimation technique. Cumulative Sum (CUSUM) and Cumulative Sum of Recursive Residuals Squares (CUSUMSQ) were also employed to test the velocity of money demand function. The result shows that interest rate, inflation and official exchange rates significantly influence the demand for money while income has no significant effect. All the variables conform to a priori expectations thereby validating the Keynesian liquidity preference theory in Nigeria. The result from the stability test shows a constant velocity of money demand function in Nigeria. Monetary authorities should therefore adopt appropriate policies that place interest rate, inflation and official exchange rates at an acceptable level to ensure optimal demand for money to spur income through private investments in the real sector

DOES FOREIGN AID IMPACT ON ECONOMIC GROWTH IN NIGERIA?

This paper examines the aid-growth relationship in Nigeria following the 2007-08 Global Financial Crisis (GFC), using time series data for the period 1970 – 2014,  autoregressive distributed lag (ARDL) and dummy variable models. The results indicate that foreign aid impacts positively on economic growth in Nigeria, both in the long- and short-run. This suggests that donor countries should acquaint themselves with the socio-economic and political realities of the domestic economy in Nigeria so that official development assistance offered to Nigeria is shielded from corruption and bad governance. However, the results further show that the GFC significantly altered the aid-growth relationship in Nigeria, such that the results of this study and the bulk of existing empirical studies for Nigeria should be interpreted with care.&nbsp

Dynamics of remittance utilization by Nigerian households

The table of contents for this item can be shared with the requester. The requester may then choose one chapter, up to 10% of the item, as per the Fair Dealing provision of the Canadian Copyright ActThe study findings show inflowing remittances to Nigeria are used primarily to subsidize households’ consumption, education and health expenditures. The paper discusses and analyzes the remittance environment, its economic importance, as well as the ‘Diaspora Bonds’ of Nigeria, comparing these to data from other countries. The remittance environment could be further enhanced by financing strategies, including ones that strictly enforce Central Bank of Nigeria (CBN) circulars which articulate general rules on electronic banking, and or the Mexican “Tre por uno/ treporuno” programme. Nigeria is one of the world’s top remittance receiving countries