Interest Rate as a Link to Investment Decision in Nigeria (Mundell – Flemming Model)

Abstract

The link between interest rate and investment decision in Nigeria was investigated in this study using Multiple Linear Regression model.A modified Mundel -Flemming model was used where interest rate was the dependent variable and other variables such as; Gross domestic product, investment level, Government spending, debt and exchange rate were independent variables.We found out that there is no strong empirical evidence that there is a link between interest rate and investment decision in Nigeria.We recommend however that there should be efficient infrastructure and the clamor for Islamic Banking, which is interest rate free should be embraced since it will not hurt investment decisions in any way.I.