Monetary Policy and Economic Growth of Nigeria

Abstract

This paper examines the impact of monetary policy on the Nigerian economy. In doing this, the Ordinary Least Squares Method (OLS) is used to analyse data between 1981 and 2008. The result of the analysis shows that monetary policy presented by money supply exerts a positive impact on GDP growth and Balance of Payment but negative impact on rate of inflation.

The recommendations are that monetary policy should facilitate a favourable investment climate through appropriate interest rates, exchange rate and liquidity management mechanism and the money market should provide more financial instruments that   satisfy the requirement of the ever-growing sophistication of operators.

Keywords: Monetary policy, economic growth, transmission mechanism and liquidity.