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Open Market Operations and Macroeconomic Stability in Nigeria: An Application of Co-Integration and Error Correction Modeling

Shehu Aliyu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper seeks to empirically assess the impact of indirect tool of monetary control on macroeconomic stability in the Nigerian economy. Four key areas were modeled using a static model. Results from both static and dynamic models were presented and the latter model yields more consistent and significant coefficients. Further, the error correction term in the four models was significant and correctly signed. The paper established case for macroeconomic stability through effective conduct of OMO operations in the long run. It supports the recapitalization measure of the CBN aimed at strengthening the financial system and better performance of the economy.

Keywords: Open market operations; macroeconomic stability; co-integration; error correction (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2005-02-05, Revised 2006-11-03
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Published in Journal of Social and Management Sciences (JOSAMS), (2006): pp. 34-50

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