Money Market
World Academy of Science, Engineering and Technology
International Journal of Social, Education, Economics and Management Engineering Vol:7, No:12, 2013
The Link between Money Market and Economic
Growth in Nigeria: Vector Error Correction Model
Approach
Ehigiamusoe, Uyi Kizito
International Science Index Vol:7, No:12, 2013 waset.org/Publication/9996702
Abstract—The paper examines the impact of money market on economic growth in Nigeria using data for the period 1980-2012.
Econometrics techniques such as Ordinary Least Squares Method,
Johanson’s Co-integration Test and Vector Error Correction Model were used to examine both the long-run and short-run relationship.
Evidence from the study suggest that though a long-run relationship exists between money market and economic growth, but the present state of the Nigerian money market is significantly and negatively related to economic growth. The link between the money market and the real sector of the economy remains very weak. This implies that the market is not yet developed enough to produce the needed growth that will propel the Nigerian economy because of several challenges.
It was therefore recommended that government should create the appropriate macroeconomic policies, legal framework and sustain the present reforms with a view to developing the market so as to promote productive activities, investments, and ultimately economic growth. Keywords—Economic Growth, Investments, Money Market,
Money Market Challenges, Money Market Instruments.
T
I.
INTRODUCTION
HE existence of money market facilitates trading in shortterm debt instruments to meet short term needs of large users of funds such as governments, banks, and similar institutions. Money market plays a key role in bank’s liquidity management and the transmission of monetary policy. By providing the appropriate instruments and partner for liquidity trading, the money market allows the refinancing of short and medium term positions and facilitates the
International Journal of Social, Education, Economics and Management Engineering Vol:7, No:12, 2013
The Link between Money Market and Economic
Growth in Nigeria: Vector Error Correction Model
Approach
Ehigiamusoe, Uyi Kizito
International Science Index Vol:7, No:12, 2013 waset.org/Publication/9996702
Abstract—The paper examines the impact of money market on economic growth in Nigeria using data for the period 1980-2012.
Econometrics techniques such as Ordinary Least Squares Method,
Johanson’s Co-integration Test and Vector Error Correction Model were used to examine both the long-run and short-run relationship.
Evidence from the study suggest that though a long-run relationship exists between money market and economic growth, but the present state of the Nigerian money market is significantly and negatively related to economic growth. The link between the money market and the real sector of the economy remains very weak. This implies that the market is not yet developed enough to produce the needed growth that will propel the Nigerian economy because of several challenges.
It was therefore recommended that government should create the appropriate macroeconomic policies, legal framework and sustain the present reforms with a view to developing the market so as to promote productive activities, investments, and ultimately economic growth. Keywords—Economic Growth, Investments, Money Market,
Money Market Challenges, Money Market Instruments.
T
I.
INTRODUCTION
HE existence of money market facilitates trading in shortterm debt instruments to meet short term needs of large users of funds such as governments, banks, and similar institutions. Money market plays a key role in bank’s liquidity management and the transmission of monetary policy. By providing the appropriate instruments and partner for liquidity trading, the money market allows the refinancing of short and medium term positions and facilitates the
References: 1794 International Science Index Vol:7, No:12, 2013 waset.org/Publication/9996702 World Academy of Science, Engineering and Technology International Journal of Social, Education, Economics and Management Engineering Vol:7, No:12, 2013