Monetary Policy and Balance of Payment: An Empirical Evidence In Nigeria

Yakubu Yusuf*, Joy Eleojo Ebeh and Ajayi Okunola Tosin
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Yakubu Yusuf*: Department of Economics, Kogi State University Anyigba
Joy Eleojo Ebeh: Department of Economics, Kogi State University Anyigba
Ajayi Okunola Tosin: Department of Economics, University of Nigeria, Nsukka

Noble International Journal of Economics and Financial Research, 2022, vol. 7, issue 1, 01-09

Abstract: Monetary policy is an approach which the central bank of any nation uses to direct the supply of money stock in order to attain general macroeconomic goals. This makes it important to conduct a study of the monetary policy-balance of payment relationship in Nigeria. The objectives of the study was to examine the impact of monetary policy on balance of payment in Nigeria. The study used annual time series data on balance of payment being the dependent variable while monetary policy rate, exchange rate, inflation rate, money supply and bank credit to private sector were the independent variables. Autoregressive distributed lag (ARDL) model was used to achieve the objective. The study revealed that all the monetary policy variables such as monetary policy rate, exchange rate, inflation rate, money supply, bank credit to private sector had significant negative impact on balance of payment in Nigeria. The study concluded, based on the findings, that increasing monetary policy rate in the Nigeria economy implies decline in balance of payment. Government of Nigeria should ensure that amount of monetary policy rate is reduced to maintain short term monetary policy rate in order to achieve favaourble balance of payment in Nigeria economy.

Keywords: Monetary Policy; Balance of Payment; Exchange Rate; Bank Credit to Private Sector (search for similar items in EconPapers)
Date: 2022
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