Monetary Policy Mechanisms and Economic Growth Stability in Nigeria

Abstract

The study considers the effectiveness of monetary policy tools in guaranteeing economic growth stability in Nigeria. In recent times monetary policy tools have become very productive in stabilizing an economy. Thus, this study employs three monetary policy instruments which include: money supply, interest rate and exchange rate to examine the effectiveness of the monetary policy on economic growth stability in Nigeria from 1998 to 2018. The findings reveal that the money supply is substantially positive in influencing the GDP, which is used as a proxy for economic growth stability. However, interest rate and exchange rate do not have a significant impact on the GDP. The study concludes that money supply is the most productive monetary policy tool in Nigeria and recommends its proper usage to achieve maximum economic benefit. The relevant financial power (CBN) in the country is encouraged to allow more accessibility to credits by reducing interest rate and exchange rate fluctuations.