Moderating Effect of Monetary Policy and Financial Development on Manufacturing Sector Performance

Adam Mukhtar, Sunday Enebeli-Uzor


The purpose of this study is to examine the moderating impact of monetary policy and financial development on manufacturing sector performance in Nigeria from 1981 to 2021. The study employed annual time series data collected from the World Bank’s Development Indicators. The data was analysed using the Autoregressive Distributed Lag estimator. The study found that monetary policy and financial development have significantly impacted manufacturing sector performance positively. Also, the interaction between monetary policy and financial development drives the performance of the manufacturing sector by lubricating access to investible funds in the sector through expansive monetary policy, stable inflation, and moderate interest rates. The practical implications of the study are that manufacturing sector performance is enhanced by expansive monetary policy and financial sector development. Moreover, monetary policy and financial development are complementary in their impact on the manufacturing sector. The main conclusion and its contribution are that financial development effectively moderates the impact of monetary policy on manufacturing in Nigeria. Thus, an expansive monetary policy and financial development strategies through efficient credit creation to the private sector would be the panacea for the dwindling performance of manufacturing in Nigeria.

Keywords: Monetary Policy; Financial Development; Manufacturing Sector Output; Autoregressive Distributed Lag; Moderating Effect

DOI: 10.7176/JESD/14-16-04

Publication date: October 2023

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