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Research Article Open access CC BY 4.0

Monetary Policy and the Real Economy: A Study of the Manufacturing and Services Sectors in Nigeria

Olumuyiwa Olamade

Journal of Economics, Management and Trade · pp. 1–13 · Published 12 Oct 2019

10.9734/jemt/2019/v25i130187

Abstract

This study examined the effect of monetary policy on the real sector of the Nigerian economy. A model was specified for each of the manufacturing and services sectors to interrogate the effect of monetary policy on the real sector. Annual data were sourced from the World Development Indicators for 1981 to 2017. Preliminary tests of the time series properties suggested the autoregressive distributed lag (ARDL) regression as the most appropriate framework for the achievement of our objectives. Diagnostic tests of the distribution of regression errors confirmed the satisfaction of all necessary regression assumptions. The models were also found stable over the study period. Thus, the models adequately represented the problems formulated for investigation and good for valid inference. While all the four channels of monetary transmission considered were found significant for value-added expansion in manufacturing, the exchange rate channel was not a significant factor in value-added change in the services sector. Our findings suggested that domestic credit is the dominant channel for the transmission of monetary impulses to the real sector. The study concluded that monetary policy will benefit the real economy more with export expansion in both the manufacturing and services sectors.

ARDL monetary policy manufacturing services diagnostics Nigeria.

Cited by 1

Monetary Policy and The Financial Performance of Listed Consumer Goods Firms in Nigeria

O. Ayoade, B. Odufisan, J. O. Adedire · African journal of accounting and financial research · 2024

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