Evaluating the Effect of Monetary Policy on Current Account in Nigeria

Ephraim Ugwu (), Sunday Keji (), Oluwabusola Olaosebikan () and Christopher Ehinomen ()
Additional contact information
Ephraim Ugwu: Department of Economics, Faculty of social sciences, Federal University, Oye-Ekiti, Ekiti State, Nigeria.
Sunday Keji: Department of Economics, Faculty of social sciences, Federal University, Oye-Ekiti, Ekiti State, Nigeria.
Oluwabusola Olaosebikan: Department of Economics, Faculty of social sciences, Federal University, Oye-Ekiti, Ekiti State, Nigeria.
Christopher Ehinomen: Department of Economics, Faculty of social sciences, Federal University, Oye-Ekiti, Ekiti State, Nigeria.

Oradea Journal of Business and Economics, 2025, vol. 10, issue 2, 71-84

Abstract: Despite several empirical investigations on the interaction effect between monetary policy transmissions and the current account balances of countries, evidences have been inconclusive. This study examines the monetary policy transmission effect on current account in Nigeria from 1970 to 2021. Employing the vector error correction model (VECM) procedures, the results of the stationarity test indicate that all the variables are first differenced I(1) at 5% significance level in Augmented Dicky Fuller test procedure. The cointegration test results showed that there are three cointegrating equations at 5% significance level. The long-run results showed that coefficient of interest rate (INTR) indicated a negative sign to the current account of Nigeria and it is statistically significant. The short-run result shows that 2.2% of the disequilibrium in the effect monetary policy on current account of Nigeria is corrected annually. The impulse response function results showed that response of current account to the global monetary policy variable, (USINTR) increased immediately and continued significantly with positive sign in the long run the result showed that response to INTR and rate of exchange (EXCH) declined immediately and continued to decline along the horizon to a negative shock in both the short and long-runs. Therefore, importation of industrial materials should be encouraged to increase the country’s export volume.

Keywords: Monetary policy shocks; current account; Cointegration; VECM; Nigeria (search for similar items in EconPapers)
JEL-codes: B23 C13 E52 E63 F32 N17 (search for similar items in EconPapers)
Date: 2025
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ojbe.steconomiceuoradea.ro/wp-content/uplo ... -September-71-84.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ora:jrojbe:v:10:y:2025:i:2:p:71-84

DOI: 10.47535/1991ojbe218

Access Statistics for this article

More articles in Oradea Journal of Business and Economics from University of Oradea, Faculty of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Tomina SAVEANU ( this e-mail address is bad, please contact ).