Market Based Monetary Policy Instruments and Industrial Growth in Nigeria (1993-2016)

Abstract

This study was initiated to investigate the effects of market-based monetary policy instruments on industrial growth in Nigeria, covering a period beginning from 1993 to 2016. Upon the threshold of the traditional Keynesian IS-LM model, and the employment of auto-regressive distributed lag model with vector auto-regression impulse response function, the study found a long-run relationship between market-based monetary policy instruments and industrial growth in Nigeria: for, industrial growth significantly responded to own innovations and impulses from all the three market-based monetary policy instruments. And monetary policy rate accounted for the largest variation in industrial growth; however, the second largest variation was initially accounted for by open market operation, but was finally accounted for by legal reserve requirement. It was, therefore, concluded that, market-based monetary policy instruments have significant effects on industrial growth in Nigeria, and it was recommended that, the central government should follow monetary policy initiatives that would stimulate industrial growth in Nigeria, as this has a greater tendency to engender economic growth and development in the country.