FACULTY OF THE SOCIAL SCIENCES
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Item Financial System Development and Economic Growth in Sub-Saharan Africa(West African Institue of Financial Economic Managemnt, 2016) Egwaikhide, F. O.; Oyinlola, M.A.; Omisakin, O.; Adeniyi, O. A.This paper contributes to the age-old debate on the link between financial development and economic growth by examining the role of monetary policy. There is a possibility that monetary policy enhances financial system performance with attendant impact on growth. To unveil this influence, this paper employs fixed effects and System GMM on data from 28 sub-Saharan African countries over the period 1996 to 2014. Results from the baseline estimation using fixed effects indicate that financial development indicators are negatively and significantly associated with growth for two of the three measures used (LGDP and PGDP), while money growth is positively related albeit insignificantly. The results largely remain the same on interaction with money growth. The coefficients of the interactive terms though largely negative are, however, not significant. The results from System GMM presents a different outcome. First, all measures of financial development turn out positive (except BBD) and insignificant. Financial development equally turns negative but insignificant after interacting with money growth. Overall, monetary policy measures, together with their interactions with financial development indicators, show up as weak growth predictors if not dampening, suggestive of the plausible independence of the nexus on the actions of monetary authorities in these countries.Item Financial System Development and Economic Growth in Sub-Saharan Africa(West African Institue of Financial Economic Managemnt, 2016) Egwaikhide, F. O.; Oyinlola, M. A.; Omisakin, O.; Adeniyi, O. A.This paper contributes to the age-old debate on the link between financial development and economic growth by examining the role of monetary policy. There is a possibility that monetary policy enhances financial system performance with attendant impact on growth. To unveil this influence, this paper employs fixed effects and System GMM on data from 28 sub-Saharan African countries over the period 1996 to 2014. Results from the baseline estimation using fixed effects indicate that financial development indicators are negatively and significantly associated with growth for two of the three measures used (LGDP and PGDP), while money growth is positively related albeit insignificantly. The results largely remain the same on interaction with money growth. The coefficients of the interactive terms though largely negative are, however, not significant. The results from System GMM presents a different outcome. First, all measures of financial development turn out positive (except BBD) and insignificant. Financial development equally turns negative but insignificant after interacting with money growth. Overall, monetary policy measures, together with their interactions with financial development indicators, show up as weak growth predictors if not dampening, suggestive of the plausible independence of the nexus on the actions of monetary authorities in these countries.Item Financial System Development and Economic Growth in Sub-Saharan Africa(West African Institue of Financial Economic Managemnt, 2016) Egwaikhide, F. O.; Oyinlola, M. A.; Omisakin, O.; Adeniyi, O. AThis paper contributes to the age-old debate on the link between financial development and economic growth by examining the role of monetary policy. There is a possibility that monetary policy enhances financial system performance with attendant impact on growth. To unveil this influence, this paper employs fixed effects and System GMM on data from 28 sub-Saharan African countries over the period 1996 to 2014. Results from the baseline estimation using fixed effects indicate that financial development indicators are negatively and significantly associated with growth for two of the three measures used (LGDP and PGDP), while money growth is positively related albeit insignificantly. The results largely remain the same on interaction with money growth. The coefficients of the interactive terms though largely negative are, however, not significant. The results from System GMM presents a different outcome. First, all measures of financial development turn out positive (except BBD) and insignificant. Financial development equally turns negative but insignificant after interacting with money growth. Overall, monetary policy measures, together with their interactions with financial development indicators, show up as weak growth predictors if not dampening, suggestive of the plausible independence of the nexus on the actions of monetary authorities in these countries.Item TRANSMISSION MECHANISM OF MONETARY POLICY IN NIGERIA(2011-11) OREKOYA, S. O.The Central Bank of Nigeria (CBN) has pursued among other goals, low and stable domestic price level and output growth using various monetary policy instruments. Despite these efforts, output growth rate averaged 1.32% between 1980 and 1989 and 2.87% between 1990 and 1999. Also, the monetary authority’s inflation rate target of 5.00% in 1992 and 31.00% in 1995 escalated to 44.59% and 72.81% respectively. There has been limited attempt to investigate the channels through which monetary policy affects output and prices in Nigeria. This study, therefore, empirically investigated monetary policy transmission mechanism and sought to establish the relative effectiveness of various monetary policy instruments in Nigeria. A Monetary Transmission Mechanism (MTM), predicated on Mishkin framework, that captures the impact of monetary policy in an economy was employed. The MTM focused on bank lending, exchange rate and interest rate channels, evident in most developing economies like Nigeria. A Structural Vector Autoregressive (SVAR) model, based on monetary policy transmission dynamics which identified the magnitude and impact of structural shocks, was developed to test the importance of these channels. Generic, composite and separate models including the impulse responses of the channels were estimated. Variance decomposition was also conducted to determine the magnitude of fluctuation attributable to different shocks. With quarterly data from 1970 to 2008, the time series properties of the models’ variables were ascertained using the Augmented Dickey-Fuller and Phillips-Perron tests. The effectiveness of Reserve Money (RM) as a monetary policy instrument over Interest Rate (IR) was evident as a marginal increase of 0.15% in RM precipitated increased output and prices declined by 0.20% and 0.60% respectively. The weakness of IR as a policy instrument was shown with an increase of 2.02% in IR yielding no significant response from output and prices. Bank lending declined from 0.89% in the first quarter to 0.23% below the baseline in the second quarter following a marginal increase of 0.05% in RM. Output declined consequently below the baseline by 0.12% and 0.15% while prices rose by 0.15% and 0.10% in the second and third quarters respectively. By implication, the weak response of exchange rate to similar increases in IR of 2.02% and RM of 0.15% suggested that this channel did not capture MTM in Nigeria. Also, output and prices’ non-response to increase in IR of 2.02% and RM of 0.15% suggested that interest rate channel was weak. Bank lending channel remained the existing MTM in Nigeria, while the impact of monetary policy shock on output and prices occurred only after a time-lag of six years. Reserve Money was a potent policy instrument with output responding more to policy variations than prices. Bank lending remained a significant channel for propagating policies to target variables. The CBN should therefore focus more on the use of RM as a policy instrument rather than a hybrid of RM and IR. There should also be emphasis on price level stability since this has the tendency of fostering output growth.