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Effect of Interest Rate Policy on Some Selected Macroeconomic Variables in Nigeria

Effect of Interest Rate Policy on Some Selected Macroeconomic Variables in Nigeria

Nwankwo, Peter Emeka PhD

Department of Accountancy, Enugu State University of Science and Technology, Enugu

Accepted: January 24th, 2023Published: January 31st, 2023

Citations – APA

Nwankwo, P. E. (2023). Effect of Interest Rate Policy on Some Selected Macroeconomic Variables in Nigeria. International Journal of Advanced Finance and Accounting, 4(1), 13-28, DOI: https://doi.org/10.5281/zenodo.10421473
This study investigated the effect of interest rate policy on selected macroeconomic variables in Nigeria, focusing on GDP and inflation. The specific objectives of the study are to determine the effect of interest rate on gross domestic Product and ascertain the effect of interest rate on inflation. The study adopted an ex post facto research design, relying on published data sourced from the CBN statistical bulletin and World Bank Reports for the periods which span from 2010-2022. Regression and cointegration analysis were employed to analyze the study. The formulated hypotheses were tested using ordinary Least Square (OLS) Regression Analysis. The findings revealed that Interest Rate does not have a statistically significant impact on both GDP and the Inflation Rate. The coefficients for the Interest Rate variable are positive but nonsignificant, indicating that changes in interest rate policy do not exert a significant influence on economic output or inflation dynamics in Nigeria. Based on these results, the study recommends diversifying policy tools beyond interest rate adjustments. Policymakers should consider employing a broader range of measures, such as fiscal policy interventions, exchange rate management, and targeted sector-specific policies, to stimulate economic growth and manage inflation effectively. It is also crucial to enhance coordination between monetary and fiscal policies to achieve better macroeconomic outcomes. By considering these recommendations, policymakers in Nigeria can improve their understanding of the complex dynamics between interest rate policy and macroeconomic variables, leading to more robust and effective policy measures for sustainable economic growth and inflation management.ABSTRACT

Keywords: Gross Domestic Product; Monetary Policy; Fiscal policy; Macroeconomic Variables