ABSTRACT

This study examined the impact of monetary policy on the growth of Nigeria economy between the period of 1985 and 2015 with the objective of finding out the impact of various monetary policy instruments (money supply, interest rate and monetary rate) in enhancing economic growth of the country within the period considered. To identify the stationarity characteristics of the data employed in the empirical investigation, various advanced econometric techniques like Augmented Dickey Fuller Unit Root Test, Johansen cointegration test and Error Correction Mechanism (ECM) were employed and the following information surfaced: Some of the variables was stationary at level while other variables became stationary after first difference. Hence they were integrated of order zero and one. The cointegration result indicated that there is long run relationship among the variable with 1 cointegrating vectors. The result of the error correction mechanism (ECM) test indicates that only broad money supply exerted significant impact on economic growth in Nigeria while other variables did not. Equally, only money supply and monetary policy rate possessed the expected sign while interest rate contradicted expectation. The study concluded that monetary policy did not impact significantly on economic growth of Nigeria within the period under review and that the inability of monetary policies to effectively maximize its policy objective most times is as a result of the shortcomings of the policy instruments used in Nigeria as such limits its contribution to growth. The study recommended for effective operation of the monetary policy measures in the Nigerian economy, the Central Bank of Nigeria should be granted full autonomy on its monetary policy functions due to insignificant impact of its tools. Partial Autonomy should be replaced with full autonomy for the central banks in the developing Economies at large.