Macroeconomic Analysis of Interest Rate and Economic Growth in Nigeria: A Time Series Approach
International Journal of Finance and Banking Research
Volume 5, Issue 4, August 2019, Pages: 91-104
Received: Jul. 3, 2019; Accepted: Aug. 7, 2019; Published: Aug. 28, 2019
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Author
Miftahu Idris, Department of Economics, Taraba State University, Jalingo, Nigeria
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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.
Keywords
Interest Rate, Economic Growth, Var Model, Granger Causality, Nigeria
To cite this article
Miftahu Idris, Macroeconomic Analysis of Interest Rate and Economic Growth in Nigeria: A Time Series Approach, International Journal of Finance and Banking Research. Vol. 5, No. 4, 2019, pp. 91-104. doi: 10.11648/j.ijfbr.20190504.14
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Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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