Title:
MONETARY POLICY VARIABLES, FINANCIAL DEEPENING AND ECONOMIC GROWTH: POST STRUCTURAL ADJUSTMENT EVIDENCE FROM NIGERIA

Authors:
Murray Monday Ebike and ZAAGHA, Alexander Sulaiman

Abstract:
This study examined the effect of monetary policy variables, financial deepening indicators and Nigeria economic growth from 1981-2018. Time series data was sourced from Central Bank of Nigeria Statistical bulletin and publications of Nigeria Bureau of Statistics. Real gross domestic products was proxy for dependent variables while the independent variables were Monetary Policy Rate, Treasury bill ratio, Treasury certificate ratio, Percentage of money supply to gross domestic product and Percentage of credit to private sector to Gross domestic products. Ordinary least square methods of cointegration, granger causality test, unit root test and Vector error correction model. The estimated regression model I shows that the effects of monetary policy variables proved 81.8 percent variations in percentage of real gross domestic products can be explained by the changes in the explanatory variables. Monetary policy rate and treasury certificate are positively related to Nigeria real gross domestic products while treasury bill rate is negatively related to the dependent variable. The estimated regression model II that 75.7 percent of variation in Nigeria real gross domestic products is explained by variations in independent variables while the remaining 24.3 percent of the variation in the model is captured by the error term, and the estimated regression line above, the results show that M2/GDP is positive while CPS/GDP have a negative impact but statistically insignificant over Nigeria real gross domestic products. From the findings, the study concludes that monetary policy variables and financial deepening indicators have significant effect on Nigeria economic growth in the post structural adjustment programme. This study recommends that the monetary policy of the Central Bank of Nigeria (CBN) should be directed to deepen the financial sector.

Keywords:
Monetary Policy Variables, Financial Deepening Indicator, Economic Growth, Post Structural Adjustment.