Monetary Policy and Commercial Bank Lending to the Real Sector in Nigeria: A Time Series Study

2018 ◽  
Vol 2 (1) ◽  
pp. 10-41
Author(s):  
Ogolo . ◽  
Tamunotonye Magnus
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Commercial Banks ◽  
Bank Lending ◽  
Real Sector ◽  
Treasury Bill ◽  
The Real ◽  
Negative Effect

This study empirically examined the effects of monetary policy on commercial banks lending to the real sector from 1981 – 2014. The objective was to examine the effectiveness of monetary policy in channeling bank credit to the real sector. Annual time series data were sourced from Central Bank of Nigeria statistical bulletin. Two multiple regression models were specifically estimated with the aid of Software Package for Social Sciences. The study modeled commercial banks credit to agricultural and manufacturing sector as the function of interest rate, monetary policy rate, treasury bill rate, exchange rate, broad money supply and liquidity ratio. The result shows collinearity that corresponds with the Eigen value condition index, and variance constant are less than the required value. The Durbin Watson statistics shows the absence of multiple auto correlation and negative autocorrelation, while the variance inflation factors indicate the absence of auto-correlation. The regression results from model one found that interest rate, monetary policy rate have positive relationship with commercial banks lending to the agricultural sector while Treasury bill rate, exchange rate, broad money supply and liquidity ratio have negative effect on the dependent variable. Model two found that interest rate, Treasury bill rate, exchange rate, broad money supply and liquidity ratio have negative effect on commercial banks lending the manufacturing sector while monetary policy rate have positive relationship with the dependent variable. We recommend that monetary policy should be harmonize with bank lending objectives to enhance commercial banks lending to the real sector of the economy and that management of commercial banks should formulate policies of managing the negative effect of monetary policy variables on its lending.

scholarly journals The Contribution of Monetary Policy to Mitigating the Consequences of the World Economic Crisis in Poland

2019 ◽  
Vol 57 (3) ◽  
pp. 329-350
Author(s):  
Vlado Vujanić ◽  
Dragan Gligorić ◽  
Nikola Žarković
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Real Exchange Rate ◽  
Money Supply ◽  
Economic Activity ◽  
The Real ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
The Impact

AbstractThe economic authorities of each country seek to maintain the expansion phase through the implementation of various economic policy measures, namely, to prevent or mitigate the recessionary phase in economic development. In that context, it is of considerable importance to understand how monetary policy decisions affect the movement of macroeconomic variables. The paper aims to examine and evaluate the contribution of monetary policy to mitigating the effects of the global economic and financial crisis, using the Autoregressive Distributed Lag model, by analysing the impact of the real exchange rate, reference interest rate and money supply on the level of economic activity in Poland. Econometric analysis encompasses the period from 2006 to 2017. The research results suggest that there is a significant relationship between real economic activity and the real exchange rate both in the short and long term, but not between the reference interest rate and the money supply.

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

Commercial Banks Credit and the Performance of Real Sector in Nigeria: 1990-2017

2020 ◽  
pp. 1-15
Keyword(s):  
Central Bank ◽  
Commercial Banks ◽  
Agricultural Sector ◽  
Manufacturing Sector ◽  
Bank Lending ◽  
Real Sector ◽  
Agricultural Credit ◽  
The Real ◽  
Scientific Discussion ◽  
The Cost

The study examined the arguments and counterarguments within the scientific discussion on commercial banks credit and the performance of real sector in Nigeria. The main objective of the study is to examine the effect of commercial banks credit on the performance of the real sector in Nigeria.Data was sourced from Central Bank of Nigeria Statistical Bulletin. A systematization literary approach for data analysis was Regression Analysis. Findings revealed that bank credit and bank lending rate does not have significant impact on real sector performance in Nigeria. It was showed that there was a positive and significant relationship between agricultural credit guarantee scheme fund and agricultural production in Nigeria. The study therefore recommends that banks should be directed to channel their credits towards the real sector to facilitate overall economic growth and development in Nigeria. It was recommended that there is the need policies that will favor the revamp of the agricultural sector in Nigeria should be given pride of place. Also, monetary authority through the Central Bank of Nigeria should create adequate policies and strategies towards deepening of the financial sector and reducing the cost of credit/loans so as to enhance productivity and consequently enhance the growth of the key sectors of economy such as manufacturing sector.

Macroeconomic Variables and Retained Earnings of Quoted Manufacturing Firms in Nigeria: A Time Variant Study

2018 ◽  
Vol 3 (1) ◽  
pp. 33-47
Author(s):  
Ngozi G. Iheduru ◽  
Charles U. Okoro
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Inflation Rate ◽  
Positive Impact ◽  
Retention Rate ◽  
Manufacturing Firms ◽  
Oil Price ◽  
Negative Effect ◽  
Retained Earnings

This study examined external factors that determine retained earnings of quoted manufacturing firms in Nigeria. Annual time series data were sourced from Central Bank of Nigerian Statistical Bulletin, and Annual Reports of the selected manufacturing firms, the study modeled retained earnings the function of money supply, exchange rate, oil price, inflation rate and interest rate. The ordinary Least Square method was employed with multiple regression model based on Statistical Package for Social Sciences version (22.0). The Durbin-Watson statistics show the presence of multiple serial autocorrelation.The result shows collinearity that corresponds with the Eigen value condition index and variance constants are less than the required number, while the variance inflation factors indicate the absence of auto-correlation.It was found that Oil price have positive impact on retention rate of the selected manufacturing firms while exchange rate and interest rate have negative impact on the dependent variable. It was also found that   money supply have negative effect on dividend payout rate while inflation rate have positive impact on retention rate. From the findings we conclude that oil price, interest rate, exchange rate and money supply have no significant relationship with dividend policy while inflation rate have significant relationship with dividend policy of the selected quoted manufacturing firms. We recommend the need for the manufacturing firms to formulate policies that leverage the negative effect of macroeconomic variables on retained earnings of the manufacturing firms and interest rate should properly be defined in the Nigerian financial market that is either full deregulated or regulated to determine the market rate of return, investment and the profitability of manufacturing firms. The operational efficiency of Nigerian capital market and the financial environment should be deepened, existing laws that does not encourage profitable investment should be changed and new laws enacted to enhance investment that will affect the profitability of manufacturing firms positively.

scholarly journals Pengaruh Inflasi dan Suku Bunga dan Nilai Tukar Rupiah serta Jumlah Uang Beredar terhadap Return Saham

FORUM EKONOMI ◽  
2018 ◽  
Vol 19 (2) ◽  
pp. 148
Author(s):  
La Rahmad Hidayat ◽  
Djoko Setyadi ◽  
Musdalifah Azis
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Stock Returns ◽  
Money Supply ◽  
Stock Exchange ◽  
Significant Variable ◽  
Inflation Rates ◽  
Negative Effect ◽  
Relationship Of

This research is to examine the effect of inflation, interest rate, exchange rate and money supply on stock returns LQ 45 listed on the Indonesia Stock Exchange. The object of this research is the return - shares out of the category LQ 45 years of research by 2010-2015. Its Sampling using purposive sampling and get the 24 stocks that meet the criteria of 45 stocks LQ 45 as a sample. Thus, the number of samples studied was 144 shares for 6 years. The method used is multiple linear regression analyzes that examine whether or not a significant variable - the independent variable on the dependent variable. Based on the results known that R indicates that there is an ideal relationship of Inflation, Interest Rate, Exchange Rate and Money Supply toward to Return shares in LQ 45. R square indicates that the variable inflation rates, interest rates, the value of exchange rate and the money supply can explain the variable return shares at LQ 45 index. Based on F test indicates the same that the variable inflation rate, interest rate, exchange rate and money supply have a significant influence on shares returns in LQ 45 listed on Indonesia Stock Exchange. The results of T test showed that the rate of inflation significant and negative effect on shares returns and interest rates positive and significant effect on shares returns while exchange Rate and the money supply no significant effect on shares returns in LQ 45 Listed on Indonesia Stock Exchange.Keywords: stock return, Inflation, Interest Rate, Exchange Rate, Money Supply.

scholarly journals The Future of Banking System and Economic Development in Nigeria

2015 ◽  
Vol 20 (1) ◽  
Author(s):  
Olu Ajakaiye ◽  
M. Adetunji Babatunde
Keyword(s):  
Economic Development ◽  
Business Model ◽  
Commercial Banks ◽  
Banking System ◽  
Bank Lending ◽  
Real Sector ◽  
The Real ◽  
Access To Credit ◽  
The Future ◽  
Banking Business

This study examined the future of banking system and economic development in Nigeria in the context of the demand following hypothesis. Although, the Nigerian economy has witnessed steady growth, the productive base of the economy is narrow. This therefore requires that banks must engage in an effective financial intermediation process to aid the transformation of the real sector as an engine of growth. However, while the deposits mobilized and assets base of the commercial banks has increased in leap and bounds, the real sector access to credit is on the decline. Rather, the bulk of the funds are invested on government short term securities given their risk free characteristics which reflect the lazy bank syndrome. Prohibitively high cost of credit and existence of hidden charges also inhibit real sector access to commercial banks loan. Hence, to reconnect the banking system with the real sector, there is a need to discourage armchair banking business model and encourage supportive banking business model, lending and secure appropriate maturity profile of loans to the real sectors, promote modified collateral bank lending model, and encourage specialization of bank branches. These are expected to aid the growth of the real sector and fast track the process of economic development in Nigeria.

scholarly journals Effect of Monetary Policy on the Nigerian Stock Market: A Smooth Transition Autoregressive Approach

2021 ◽  
Vol 12 (No. 1) ◽  
pp. 1-21
Author(s):  
Jamilu S. Babangida ◽  
Asad-Ul I. Khan
Keyword(s):  
Monetary Policy ◽  
Stock Market ◽  
Money Supply ◽  
Stock Exchange ◽  
Smooth Transition ◽  
Exchange Market ◽  
Treasury Bill ◽  
Negative Effect ◽  
Effect Of Monetary Policy ◽  
Smooth Transition Autoregressive

This paper examines the nonlinear effect of monetary policy decisions on the performance of the Nigerian Stock Exchange market, by employing the Smooth Transition Autoregressive (STAR) model on monthly data from 2013 M4 to 2019 M12 for All Share Index and monetary policy instrument. This study considers the two regimes characterizing the stock market, which are the lower regime (the bear market) and the upper regime (the bull market). The results show evidence of nonlinear effect of monetary policy on the stock exchange market. Monetary policy rate, money supply, lagged monetary policy rate and lagged treasury bill rate are found to have significant positive effects on the stock exchange market in the lower regime while current treasury bill rate shows a negative effect. In the upper regime, money supply and lagged treasury bill rate have significant negative effect on the stock market. The current treasury bill rate is found to have a positive effect on the stock exchange market. It is recommended that the Central Bank of Nigeria should maintain a stable money supply growth that is consistent with increased activities in the Nigerian stock market.

scholarly journals Interest Rate Management and the Nigerian Economy (1986 — 2018)

2019 ◽  
pp. 1-15
Author(s):  
Kalu, Uko Kalu ◽  
Anyanwaokoro Mike
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Gross Domestic Product ◽  
Money Supply ◽  
Significant Relationship ◽  
Domestic Product ◽  
Ex Post ◽  
The Impact ◽  
Bound Test

This study sought to examine the impact of interest rate on the Nigeria’s economy during the pre and post Regulation periods (1986 – 2013). It also investigated the joint influence of Inflation, Investment, Exchange Rate, Money Supply and Monetary Policy Rate individually on the Gross domestic Product which was used a proxy for output as well as the causality between all the factors combined and gross domestic product. Ex post facto method was adopted In order to test the hypothesis, the researcher adopted Augmented Dickey Fuller, ARDL, Bound Test and Error Correction Model. The result showed that no significant relationship exists between Gross Domestic Product and Investment, Exchange Rate and Money Supply while still affirming that a significant relationship exist between Gross Domestic Product, Monetary Policy Rate and inflation. The eye of the authorities should be on Inflation at all times, Prudent management of our Oil earnings, adequate savings (Foreign Reserve) and investments as these will help stabilize the fluctuating exchange rate  with its consequent influence on interest rate and economic growth.

scholarly journals disaggregated analysis of monetary policy effects on the agricultural sector in Nigeria

2020 ◽  
Vol 14 (3-4) ◽  
pp. 47-58
Author(s):  
Jonathan E. Ogbuabor ◽  
Onyinye I. Anthony-Orji ◽  
Charles O. Manasseh ◽  
Anthony Orji
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Crop Production ◽  
Agricultural Sector ◽  
Forecast Error ◽  
Monetary Policy Shocks ◽  
Forecast Horizon ◽  
Policy Shocks

This study provides a disaggregated analysis of the effects of monetary policy shocks on the agricultural sector in Nigeria from 1981Q1 to 2016Q4. The study utilized the generalized impulse responses and the normalized generalized forecast error variance decompositions from an underlying VAR model, which are order-invariant. The four monetary policy variables used in the study are interbank call rate, monetary policy rate, broad money supply and exchange rate; while the four agricultural sub-sectors investigated are crop production, forestry, fishing and livestock. The study also controlled for the general price level and other economic activities in the overall economy. The findings indicate that the aggregate agricultural sector and its various sub-sectors consistently responded negatively to unanticipated monetary tightening in most of the forecast horizon; while the immediate impact of monetary policy shocks is transmitted to the agricultural sector through the interest rate and money demand (credit) channels. The findings further indicate that apart from these two channels, the roles of monetary policy rate and exchange rate are non-negligible in the long-run. The role of money supply channel in spreading monetary policy shocks to the agricultural sector remained muted all through. The study concludes that the monetary authority should evolve interest rate, credit, and exchange rate policies that will promote the development of the agricultural sector in Nigeria. JEL CODES: E52; N50; C22; N57

scholarly journals Stock Market Reaction to Monetary Policy Modifications: Evidence from an Emergent Market

2021 ◽  
Vol 10 (3) ◽  
pp. 59
Author(s):  
Cordelia Onyinyechi Omodero ◽  
Dorcas Titilayo Adetula ◽  
Kingsley Adeyemo
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Stock Market ◽  
Money Supply ◽  
Market Reaction ◽  
Emerging Market ◽  
Harmful Effect ◽  
Stock Market Reaction ◽  
Stock Market Performance

This study evaluates the stock market reaction to monetary policy modifications in an emerging market using Nigeria as a case study.  Due to the crucial role the stock market plays in the global economy and finance, it becomes an attraction for most researchers and policymakers who try to find a basis for its smooth operation.  This study uses data that cover a period from 1998 to 2018 to establish what the position is in recent times empirically. The data are collected on all share index, money supply, interest rate and exchange rate. The multiple regression results provide evidence that the money supply has a significant favourable influence on the all-share index. In contrast, the interest rate has an immaterial harmful effect on the stock market output.  However, the result indicates that the exchange rate affects the stock market performance negatively, but the effect is insignificant. Based on these findings, the study suggests pilot test running of all monetary policy amendments by the monetary authority in the country before full implementation.  The government should encourage the CBN to cut down on interest rate and avoid all policies that will lead to a crash in the Nigerian stock market.   Received: 16 October 2020 / Accepted: 12 February 2021 / Published: 10 May 2021

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