Monetary Policy and Financial Stability in the Nigerian Banking Industry

Oparah Felix Chukwudi and James Tumba Henry

International Journal of Financial Research, 2020, vol. 11, issue 1, 82-114

Abstract: This study examined the impact of monetary policy on financial stability in the Nigerian banking industry for the period 2008Q1 to 2016Q2, using an error correction model. Banking industry financial stability index (BIFSI) was computed within the study and was used as a measure of financial stability in the Nigerian banking industry. The study discovered that the impact of monetary policy on financial stability in the Nigerian banking industry was weak. It also revealed a significant long run equilibrium relationship between monetary policy and financial stability in the Nigerian banking industry with a speed of adjustment to long run equilibrium of 66.54%. It was concluded that open market operation and exchange rate channels are more effective channels of transmitting monetary policy to financial stability in the banking industry, than interest rate channel.

Keywords: financial stability; monetary policy; Z-Score; financial soundness indicators; monetary policy rate; deposit money banks; global financial crisis (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:11:y:2020:i:1:p:82-114

DOI: 10.5430/ijfr.v11n1p82

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