Evaluating the Impact of Monetary Policy on the Growth of Emerging Economy: Nigerian Experience

Abstract

The study evaluated the impact of monetary policy on the growth of emerging economy: Nigerian experience. It was not a gain saying that monetary policy played significant roles in any country’s financial growth and development both in high and low income economies, but are constrained by fiscal dominance, high cost of funds, high inflation etc., but exchange rate, interest rate, money supply and foreign reserve are some of the significant monetary policy indicators that can ascertain national economic growth. The study covers between 1990 and 2012, the scope is considered because it fell within the era of market-based monetary period. Automated Statistical Package Technique (ASPT) was used to analyse the model. The Ordinary Least Square (OLS) technique was adopted in the study in order to assess the relationship among the economic variables. The paper concludes that the major problem of monetary policy was as a result of the CBN’s inability to control the money supply and bank credits, which were very essential for measuring and proffering solution to the substantial credit spreads between short-term central bank policy rates and the rates facing households and firms in the economy. The study recommended that the government should implement countercyclical policy that would lead to the desired expansion of output (and employment); though, it entailed an increase in the money supply, which would also result in an increase in prices, but policymakers should commit to holistic policies, rules and regulations that would remove full discretion in adjusting monetary policy.