The study explored monetary policy effect on inflation stabilization in Nigeria. Increasing levels of indebtedness may have reduced the fiscal space for fiscal policy intervention and this leaves monetary policy as the real tool of choice for macroeconomic stabilisation. The question we need to ask then is, how effective is this tool of choice? Monthly time series data from 2009-2018 were used in estimating the model. The ADF test for the stationarity, the johansen cointegration test and the vector error correction model were utilized in testing the variables. The findings from the unit root test did indicate stationarity at first difference 1(1). The cointegration (Johansen) test indicates that there was a nexus linking inflation and all the regressors adopted in the long term. The result of the VECM for the two estimated models shows a self-equilibrating mechanism of 14 per cent and 32 per cent for the first and second models respectively. The findings further reveal that the variables; liquidity ratio, policy rate (MPR), exchange rate, reserve requirement and treasury bills rate all had an effective impact on the inflation rate and that that effect was very significant. Hence, the CBN’s monetary policy shocks do seem to have the expected traction on the Nigerian economy. The results make it pertinent for the CBN to utilize all the policy measures adopted in order to keep inflation within acceptable thresholds and prepare to keep inflation within the targeted range of 6-9 per cent, no matter the anticipated or unanticipated strong head winds.
Does Real Exchange Rate Volatility Matters For Foreign Direct Investment (FDI) Inflow? An Empirical Reflection of the Nigerian Situation (Published)
The research has been on the Real Exchange Rate (RER) and Foreign Direct Investment (FDI) inflow. This has become necessary given the declining competitiveness of the Nigeria currency and economy. The study covered the period between 1981 and 2017. The Cointegration and the Error correction Model of the Ordinary least squares technique were used to analyze the data. The result of the Augmented Dickey Fuller (ADF) unit root test indicates that the variables became stationary after the first difference was taken. The Johansen Cointegration test indicates a long run equilibrium relationship among the variables. Also the result of the parsimonious Error Correction Model (ECM) indicates that the volatility of the Real Exchange Rate (RER) has a negative and significant impact on the inflow of Foreign Direct Investment (FDI) into Nigeria. The openness of the economy has a positive and significant relationship with the Foreign Direct Investment (FDI). The interest rates has a negative and significant impact on the Foreign Direct Investment (FDI) inflow. It was therefore recommended amongst others that the government should not only concentrate on the manipulation of the exchange rate but should make concerted efforts to diversify the productive base of the economy so as to increase the competiveness of the Nigerian economy and hence its currency.
Understanding the Macroeconomic Implications of the Dynamics of Monetary Policy Measures: Lesson from the Nigerian Economy (Published)
In this paper, econometrics evidence linking monetary policy measures to key macroeconomic goals with emphasis on price stability and unemployment is provided using error correction mechanism (ECM), unit root and cointegration tests in addition to basic descriptive statistics. The unit root test results showed that the variables are mixed integrated. The outcomes of the cointegration test reveal that the variables in each of the models have long run relationship and as such can be represented as an ECM. The estimated parsimonious ECM show that the current values of cash reserve ratio and exchange rate as well as lagged values of credit to the private sector are positively and significantly related to inflation. On the contrary, the short run effect of contemporaneous and lagged values of interest rate on inflation is negative. Additionally, money supply exerts significant negative effect on inflation during the study period. The result of the estimated unemployment model reveals that the current and first lag of interest rate has significant positive effect on unemployment. The result also shows that the current and third lag of money supply has significant positive impact on unemployment rate. The short run impact of credit to the private sector and third lag of exchange rate on unemployment is negative. The error correction coefficients in each of the models are associated with the expected negative sign and are statistically significant at 5 percent level. Owing to the findings, the paper recommends that the Central Bank of Nigeria should adequately monitor the implementation of monetary policy in order to prevent or reduce bottlenecks that may impair its effectiveness in achieving goals of price stability and employment generation.
The study explores the relationship between trade liberalization and economic growth in Nigeria. Two equations were estimated in which index of industrial production proxied as yearly average capacity utilization as a function of degree of openness, terms of trade and real export. Similarly, in the second equation, real gross domestic product as a function of degree of openness, terms of trade, real export and trade liberalization dummy was estimated. A vector error correction model was employed for the study in which results show that openness of the foreign sector and trade liberalization dummy have positive significant impact on both industrial performance and economic growth in Nigeria within the period under review. The paper therefore recommended for the removal of all known impediments to trade such as excessive import levies and arbitrary tariffs.
Environmental Kuznets Curve Hypothesis in Sub-Saharan African Countries: Evidence from Panel Data Analysis. (Published)
The paper investigates the validity of Environmental Kuznets Curve (EKC) hypothesis in Sub-Saharan African countries, using panel data analysis for the period 1980 to 2012. It seeks to examine the effects of economic growth on the environmental quality of the countries in the sub-region. The paper used annual secondary time series data obtained from World Bank Development Indicators (WDI) for the period under review. The validity of EKC hypothesis was examined through panel data fixed and random effects analysis. Panel unit root test and panel cointegration test were conducted to determine the degree of stationarity of the variables and long–run relationship among our variables of interest respectively. The paper considers a variety of pollutants in estimating the EKC pattern with observation that the responses of EKC depend largely on the nature of pollutants. The results of the empirical analysis support the validity of the EKC hypothesis for solid emission (CSF) and composite factor of emission (CFE) but maintain non-existence of EKC hypothesis for other pollutants: carbon emission (CO2), industrial emission (CIN) and liquid emission (CLQ). The paper confirms that not all the selected environmental pollutants follow the same EKC process in the selected countries of Sub-Saharan African (SSA). The paper recommends that the impression of “polluting the economy now as it clears itself later” does not hold for many of the pollutants and should not be adopted in the region so as to ensure better environmental quality as there is no proof of better quality if it is not regulated. The findings show that SSA countries need to harmonise a well – coordinated environmental and economic policy mix that would ensure greater output but at the same time protect their environment from degradation and pollution
ENVIRONMENTAL KUZNETS CURVE HYPOTHESIS IN SUB-SAHARAN AFRICAN COUNTRIES- EVIDENCE FROM PANEL DATA ANALYSIS. (Published)
The paper investigates the validity of Environmental Kuznets Curve (EKC) hypothesis in Sub-Saharan African countries, using panel data analysis for the period 1980 to 2012. It seeks to examine the effects of economic growth on the environmental quality of the countries in the sub-region. The paper used annual secondary time series data obtained from World Bank Development Indicators (WDI) for the period under review. The validity of EKC hypothesis was examined through panel data fixed and random effects analysis. Panel unit root test and panel cointegration test were conducted to determine the degree of stationarity of the variables and long–run relationship among our variables of interest respectively. The paper considers a variety of pollutants in estimating the EKC pattern with observation that the responses of EKC depend largely on the nature of pollutants. The results of the empirical analysis support the validity of the EKC hypothesis for solid emission (CSF) and composite factor of emission (CFE) but maintain non-existence of EKC hypothesis for other pollutants: carbon emission (CO2), industrial emission (CIN) and liquid emission (CLQ). The paper confirms that not all the selected environmental pollutants follow the same EKC process in the selected countries of Sub-Saharan African (SSA). The paper recommends that the impression of “polluting the economy now as it clears itself later” does not hold for many of the pollutants and should not be adopted in the region so as to ensure better environmental quality as there is no proof of better quality if it is not regulated. The findings show that SSA countries need to harmonise a well – coordinated environmental and economic policy mix that would ensure greater output but at the same time protect their environment from degradation and pollution.
The study aims at evaluating the link between inflationary rate and economic growth in Nigeria. It also examines the nature and form of association between inflationary rate and exchange rate as well as interest rates from 1979 t0 2010.Ordinary least squares approach in the form of multiple regression was adopted in examining the relationship among the variables while the causalities were evaluated using Granger Causality model. It is pertinent to check whether the short run relationships would be sustained in the long run. To achieve this, Johansen and Juselius cointegration technique was adopted while the variables were adjusted for stationarity using the Augmented Dickey- Fuller (ADF) tests for unit root. It was found that inflationary rate is negatively related with real gross domestic product while exchange rates and interest rates are positively related with inflationary rate though not to a very significant extent. This is sustainable even in the long run and the implication is that when inflationary rate is rising, it affects the economy negatively as growth is dampened. On causality, at both lag 2 and lag 4, the study reveals that there is no causality between inflationary rate and real gross domestic product. However, at lag 2, there is a unidirectional causality running from inflationary rate to interest rate and also a unidirectional causality running from interest rate to real gross domestic product. At lag 4, there is a unidirectional causality running from interest rate to inflationary rate and from interest rate to exchange rate and also a unidirectional causality running from exchange rate to real gross domestic product. Consequently, efforts should be geared towards keeping inflationary rate at a single digit level to enhance the growth and development of Nigeria economy and to ensure that macroeconomic activities are kept alive
The Determinants of Foreign Reserves in Nigeria (Review Completed - Accepted)
It has been seen that Foreign exchange reserves adequacy is a key component of good macroeconomic management. The modified version of the buffer stock model was applied to assess the determinants of foreign reserve in Nigeria. The study regressed foreign reserve variable on macroeconomic variables: real income, interest rate differential (a measure of opportunity cost), exchange rate volatility, financial openness, current account vulnerability, benchmark stock of reserves, and the demand for foreign exchange. In order to avoid any spurious regression results, the time series data from 1970 -2010 was subjected to stationarity tests. The ADF cointegration procedure used suggested the existence of long run relationships. Hence, the short run dynamics was examined by means of an error correction model. The empirical evidence shows that growth in Nigeria’s foreign reserves is not influenced in the long run by current account vulnerability (proxied by trade opennes), the opportunity cost of holding reserves (DID) and the benchmark stock of reserves but by other determinants such as the real Gross Domestic Products (Y), exchange rate volatility (Ev), financial openness (Fop), and the demand for foreign exchange (DFex).
This study attempted to examine the long-run relationship and direction of causality between economic growth and government spending with consideration for exchange rate, consumer prices and monetary policy rate. This is with a view to determine the validity of Wagner’s law in Nigeria during the period 1961 to 2011. Times series data on variables such as real GDP, government expenditure, exchange rate, inflation rate and monetary policy rate during the period (1961-2011) were used. These data were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin 2011 Edition; World Development Indicator (WDI) Latest version and Federal Ministry of Finance. The study identified the order of integration of the variables used in the study using Phillips-Perron unit root test. The test was conducted with a drift and Time trend. The study also employed Johansen multivariate cointegration tests to determine if a group of I(1) variables converge to a long-run equilibrium. Vector Error Correction Mechanism was employed to model causal relation between economic growth and government spending. The results showed that variables are individually integrated of order one that is, a I(1) process. Johansen multivariate cointegration test showed that variables are cointegrated. Both the Trace test and Maximum-Eigen test suggest one cointegrating vector. The result of VECM estimates provided evidence in support of long-run causality running from real GDP to government spending. However, while evidence exists for long-run causality running from real GDP to government spending such evidence does not exist for short-run causality in this same direction. This indicates that Wagner’s Law is supported only in the long-run. The study therefore concludes that Wagner’s law is never a Myth but a Reality in Nigeria over the sample period.
Stability of Demand for Money Function in Nigeria (Review Completed - Accepted)
This study examines the long-run demand for real broad money function and its stability in Nigeria for the period 1986 to 2011. The study employs Ordinary Least Squares, Augmented-Dickey Fuller and Phillips-Perron tests for unit root, Engle-Granger approach for cointegration, CUSUM and CUSUMSQ tests for stability. The results of the stability and cointegration tests confirm that a stable, long-run relationship exists between demand for real broad money aggregate and its determinants: income, domestic real interest rate, expected rate of inflation, expected foreign exchange depreciation, and foreign interest rate. Furthermore, the results show that the income elasticity and foreign interest rate coefficients are positive while the domestic real interest rate, inflation rate, and exchange rate depreciation coefficients are negative, respectively. Hence, the apex bank in Nigeria can target the broad money (M2) aggregate to achieve macroeconomic objectives
Impact of Agricultural Export on Economic Growth in Cameroon: Case of Banana, Coffee and Cocoa (Published)
The main objective of the present analysis is to explore and quantify the contribution of agricultural exports to economic growth in Cameroon. It employs an extended generalized Cobb Douglas production function model, using food and agricultural organization data and World Bank Data from 1975 to 2009. All variables were non stationary and of an order I (1), so the Cointegration test was conducted for long run equilibrium. All the variables confirmed cointegration and as such the conventional vector error correction model was estimated using the Engle and Granger procedure. The findings of the study show that the agricultural exports have mixed effect on economic growth in Cameroon. Coffee export and banana export has a positive and significant relationship with economic growth. On the other hand, cocoa export was found to have a negative and insignificant effect on economic growth. Base on our findings, it is recommended that policies aimed at increasing the productivity and quality of these cash crops should be implemented. Also additional value should be added to cocoa and coffee beans before exporting. When this is done, it will lead to a higher rate of economic growth in Cameroon