Spillover Effect of Interest Rate Volatility on Banking Sector Development in Nigeria: Dynamic ARDL Bound Test Approach

Alimshan Faizulayev () and Isah Wada
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Alimshan Faizulayev: Almaty Management University
Isah Wada: University of Mediterranean Karpasia

A chapter in Global Issues in Banking and Finance, 2019, pp 111-125 from Springer

Abstract: Abstract This study investigates the dynamic spillover effect in the United States (US) interest rate volatilityInterest Rate Volatility on the Nigerian banking sector developmentBanking Sector Development. The study adopts the bounds test approach in the context of the dynamic autoregressive distributed lag model (ARDL)Autoregressive Distributed Lag Model (ARDL) and the modified Granger causalityModified Granger Causality test. Empirical results support the dynamic impact in the spillover effect of US interest rate volatilityInterest Rate Volatility on the banking sector developmentBanking Sector Development in NigeriaNigeria—over the short and long run time horizons. The research reveals that the spillover in the US interest rate volatilityInterest Rate Volatility affects the development of the Nigerian banking sector through numerous channels—most significantly—via the real interest rate channel. Thus, the empirical results in the current research confirm the spillover impacts of US interest rate volatilityInterest Rate Volatility consistent with other empirical studies—and is of interest to central bank monetary policy decisions.

Keywords: Autoregressive distributed lag model (ARDL); Banking sector development; Interest rate volatility; Modified Granger causality; Nigeria (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-030-30387-7_8

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DOI: 10.1007/978-3-030-30387-7_8

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