Application of Markov Chain Movements in Finite State on Monetary Policy Shocks of Economic Variables

Ntul A.e, Essi I.d, Amos E and Amadi I.U.
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Ntul A.e: Department of Statistics, University of Cross Rivers State, Nigeria.
Essi I.d: Department of Mathematics, Rivers State University, Nkpolu Oroworokwo, Port Harcourt, Nigeria.
Amos E: Department of Mathematics, Rivers State University, Nkpolu Oroworokwo, Port Harcourt, Nigeria.
Amadi I.U.: Department of Mathematics & Statistics, Captain Elechi Amadi Polytechnics, Port Harcourt, Nigeria.

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Abstract: Markov Chain provides a useful tool for modeling and analyzing the dynamics of monetary policy decisions. In particular, the data series were transformed into 3-step transition probability matrix solutions to cover independent categories of Nigerian Economy Growth policies. The inflation, unemployment and gross domestic trade rates series were used as column vector matrices where the least three data series were chosen. From the stochastic analysis of the problems captured the dynamics of monetary policy decision-making, including the likelihood of switching between reduce state, increasing state and no-change state all in finite state. The impact index factor on monetary variables were effectively obtained and compared which showed the highest of 0.24% reducing impact of Gross Domestic trade rates on Gross Domestic product(GDP) at current market price. Finally, other statistical variations such as mean, kurtosis and skewness were considered and discussed in this paper. This informs Nigerians on the effectiveness of different monetary policy strategies and their various impacts on the economy for the purpose of investment plans.

Date: 2025-09-06
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Published in Asian Journal of Economics, Finance and Management , 2025, 7 (1), pp.917-930. ⟨10.56557/ajefm/2025/v7i1320⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05246894

DOI: 10.56557/ajefm/2025/v7i1320

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