Monetary Policy, Inflation and Economic Growth in Nigeria: Further Evidence from Asymmetric ARDL

Abstract

Generally, price stability in terms of low and stable inflation stimulates economic growth while, rising and fluctuating inflation leads to uncertainty in the economy, which severely affect economic growth. Several monetary policies have been pursued by the monetary authority of the country. However, the potent issue remains whether or not; the monetary policy measures adopted over the years have impact on the Nigerian economy. Previous studies have adopted different methodologies, which assume linearity in the data generating process. The present study examines the asymmetric effect of monetary policy and inflation on the economic growth in Nigeria. The study employs annual time series data on interest rate, inflation and real GDP for the period, 1980-2017. The methodology of asymmetric Autoregressive Distributed Lags (ARDL) model was employed. The findings reveal the presence of asymmetric effects of monetary policy, interest rate and inflation on economic growth over the period covered by the study. The study suggests that policy makers should consider asymmetric influences of stabilization policies on the macro economy, while designing overall economic policies.