This study examines the impact of interest rate on economic growth in Nigeria using annual time series data spanning 1980 to 2017. This phenomenon is particularly interesting from a theoretical standpoint as well as for the understanding of financial market mechanisms. The Vector Autoregression (VAR) model and the Granger causality test are employed to estimate the model coefficients and measure the causal relationship among the concerned variables. From the VAR-based impulse response function and its corresponding variance decomposition estimates, result shows the existence of negative relationship between interest rate and economic growth in Nigeria. In addition, the Granger causality test indicates the presence of bi-directional causal relationship between interest rate and economic growth. Consequently, monetary authorities should designed and implement interest rate policies that enhance investment and take into cognisance other elements that retard investment progression. To attain the desired growth level in Nigeria, monetary authorities and policy makers should adopt policy measures that are growth oriented and have the potentials to accelerate the economy to higher productivity and sustainable economic growth.
| Published in | International Journal of Finance and Banking Research (Volume 5, Issue 4) |
| DOI | 10.11648/j.ijfbr.20190504.14 |
| Page(s) | 91-104 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2019. Published by Science Publishing Group |
Interest Rate, Economic Growth, Var Model, Granger Causality, Nigeria
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APA Style
Miftahu Idris. (2019). Macroeconomic Analysis of Interest Rate and Economic Growth in Nigeria: A Time Series Approach. International Journal of Finance and Banking Research, 5(4), 91-104. https://doi.org/10.11648/j.ijfbr.20190504.14
ACS Style
Miftahu Idris. Macroeconomic Analysis of Interest Rate and Economic Growth in Nigeria: A Time Series Approach. Int. J. Finance Bank. Res. 2019, 5(4), 91-104. doi: 10.11648/j.ijfbr.20190504.14
AMA Style
Miftahu Idris. Macroeconomic Analysis of Interest Rate and Economic Growth in Nigeria: A Time Series Approach. Int J Finance Bank Res. 2019;5(4):91-104. doi: 10.11648/j.ijfbr.20190504.14
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Download@article{10.11648/j.ijfbr.20190504.14,
author = {Miftahu Idris},
title = {Macroeconomic Analysis of Interest Rate and Economic Growth in Nigeria: A Time Series Approach},
journal = {International Journal of Finance and Banking Research},
volume = {5},
number = {4},
pages = {91-104},
doi = {10.11648/j.ijfbr.20190504.14},
url = {https://doi.org/10.11648/j.ijfbr.20190504.14},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20190504.14},
abstract = {This study examines the impact of interest rate on economic growth in Nigeria using annual time series data spanning 1980 to 2017. This phenomenon is particularly interesting from a theoretical standpoint as well as for the understanding of financial market mechanisms. The Vector Autoregression (VAR) model and the Granger causality test are employed to estimate the model coefficients and measure the causal relationship among the concerned variables. From the VAR-based impulse response function and its corresponding variance decomposition estimates, result shows the existence of negative relationship between interest rate and economic growth in Nigeria. In addition, the Granger causality test indicates the presence of bi-directional causal relationship between interest rate and economic growth. Consequently, monetary authorities should designed and implement interest rate policies that enhance investment and take into cognisance other elements that retard investment progression. To attain the desired growth level in Nigeria, monetary authorities and policy makers should adopt policy measures that are growth oriented and have the potentials to accelerate the economy to higher productivity and sustainable economic growth.},
year = {2019}
}
TY - JOUR T1 - Macroeconomic Analysis of Interest Rate and Economic Growth in Nigeria: A Time Series Approach AU - Miftahu Idris Y1 - 2019/08/28 PY - 2019 N1 - https://doi.org/10.11648/j.ijfbr.20190504.14 DO - 10.11648/j.ijfbr.20190504.14 T2 - International Journal of Finance and Banking Research JF - International Journal of Finance and Banking Research JO - International Journal of Finance and Banking Research SP - 91 EP - 104 PB - Science Publishing Group SN - 2472-2278 UR - https://doi.org/10.11648/j.ijfbr.20190504.14 AB - This study examines the impact of interest rate on economic growth in Nigeria using annual time series data spanning 1980 to 2017. This phenomenon is particularly interesting from a theoretical standpoint as well as for the understanding of financial market mechanisms. The Vector Autoregression (VAR) model and the Granger causality test are employed to estimate the model coefficients and measure the causal relationship among the concerned variables. From the VAR-based impulse response function and its corresponding variance decomposition estimates, result shows the existence of negative relationship between interest rate and economic growth in Nigeria. In addition, the Granger causality test indicates the presence of bi-directional causal relationship between interest rate and economic growth. Consequently, monetary authorities should designed and implement interest rate policies that enhance investment and take into cognisance other elements that retard investment progression. To attain the desired growth level in Nigeria, monetary authorities and policy makers should adopt policy measures that are growth oriented and have the potentials to accelerate the economy to higher productivity and sustainable economic growth. VL - 5 IS - 4 ER -
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