Interest Rate Pass-Through to Macroeconomic Variables: The Nigerian Experience

The effectiveness of monetary policy depends on the adjustment response of Central Banks short-term interest rate on the real interest rates charged by commercial banks and ultimately on macroeconomic indicators of investment and consumption in the economy. Thus, the extent of interest rate pass-through largely depends on how effective the process of financial intermediation works and to what extent individual bank characteristics influence or hinder a perfect adjustment of product rates based on market conditions. The study examines the speed and completeness of pass-through from policy rates to retail bank rates and the effectiveness of monetary policy stance in influencing macroeconomic policy targets using a co-integration analysis based on Johansen and Juselius maximum likelihood and Engle-Granger two step procedures for the period 1970–2011. The VAR based Error Correction Model (ECM) and the Mean Adjustment Lag (MAL) was used to determine the short run estimates and asymmetric behaviour respectively. The study found an evidence of downward stickiness both in the short-run and long-run policy pass-through to the retail bank rates. In order to ensure robustness of the result, the Impulse Response Function (IRF) and Variance Decomposition (VD) analysis were conducted and similar slow and sluggish pass-through was obtained. The study as well, found pass-through from policy rate to macroeconomic variables to exhibit extremely rigid immediate responses

Global Financial and Macroeconomic Fluctuations: Implications for African Economic Development

In the light of dampening effects of the global financial melt-down, the paper examines the trends in financial flows, particularly foreign direct investment (FDI) and the possible effects of the global financial crisis and macroeconomic fluctuations on economic development in Africa. The paper employs simple panel data approach which links panel data methodology that allows for individual heterogeneity, while the method of estimation is the Fixed and Random Effects regression. The method of panel VAR is also used in the paper with a view to capturing the dynamic effects of FDI inflows for policy analysis using the impulse response functions. The number of countries (27) included in the paper and the period of estimation, 1987-2007, are informed by data availability. With some suggestions on the direction of policy to stimulate increased financial flows, the paper opines that there is the need for comparative dynamics of African economies in order to return to the path of sustainable growth and development

EXPORT AND GROWTH IN THE NIGERIAN ECONOMY A CAUSALITY TEST'

Using Granger causality test, th is paper examines the question of pairwise causal relationships between total export (oil export) and GDP of Nigeria during the period 1960-1985. Both simple and instantaneous causality tests were carried out along the line proposed by Pierce and Haugh (1977). The tests results show the existence of strict econometric exogeneity between export and GOP and a un idirectional causality from GDP to Oil export. The statistical evidence thus imply a rejection of the export promotion policies as effective development strategies in Nigeria. But in the instantaneous framework a feedback effect is observed and this consolidates the export promotion hypothesis contemporaneously

A Business Cycle Model for Nigeria

The current global financial meltdown draws, once again, attention to the existence of business cycle fluctuations. Experts are of the view that the ongoing crisis is far deeper than the great depression of the 1930s. It should be recalled that the Keynes and Keynesianism was a response to that depression. Therefore, the objective of this paper is to develop a small business cycle model in the spirit of Dynamic Stochastic General Equilibrium (DSGE) model for Nigeria designed to examine the sources of business cycles, and use the model for policy analysis. This paper considers the implications of three policy shocks namely: monetary supply, technology and export supply on some macroeconomic aggregates. While the paper adopts the Nason and Cogley (1994) and Schorfheide (2000) models, it, however, introduces export sector into the model with a view to capturing the transmission channel of terms of trade. The method of estimation is the Bayesian and the paper uses DYNARE codes (dyn_mat_v4). The results obtained in this study show that the Nigerian business cycle is driven by both real and nominal shocks

Rethinking Regional Energy Policy Do Threats Matter in Supply and Generation Process?

The study investigates potential threats to energy security and sustainable electricity production from a regional perspective, after identifying a host of factors that are likely to affect sustainable energy production and supply using seemingly unrelated regression estimation, which produces efficient estimates. Our results show that energy security which we described as the level of diversification in regional specific energy generating sources is probably being affected by regional specific level of industrialization and domestic energy consumption. Issues of over dependence on specific sources of energy supply (particularly nuclear production sources) were also found to have a negative effect on energy security and probably increase the risk of future failure in energy supply. Energy policy was also found to have a significant effect on energy security. The impacts of various constraints on electricity production were also considered. It was found that many factors affect electricity output production in regions particularly environmental factors that affect consumption and generation