TRANSMISSION MECHANISM OF MONETARY POLICY IN NIGERIA

AUTHOR: OKARO, CELESTINE SUNDAY

FROM AFRICAN BANKING AND FINANCE REVIEW VOL. 1 NO.2 APRIL 2011

PUBLISHED BY THE DEPARTMENT OF BANKING AND FINANCE, NNAMDI AZIKIWE UNIVERSITY, AWKA.

This paper, explored the empirical importance of credit. It adds to the existing literature in three ways. First, it analyses in a systematic way both endogenous and exogenous instruments of monetary mechanism using information on the country’s main economic objectives as a proxy for bank credit availability. Secondly it provided a framework in which to analyse the evidence in controlling money and credit. Thirdly, by using bank’s prices (rather than quantities) it provides an alternative way to disentangle loan supply from loan demand shift in the ‘credit channel’ literature. The paper also provides empirical evidence on the role of banks in the monetary transmission process. The principal channel appears through lending to firms, which influences investments in the entire economy. The existence of an effective banking industry is necessary for every economy because it create the necessary environment for economic growth and development through its role in inter-mediating funds from surplus to deficit economic units. This stimulates investment, economic growth, and employment as well as international trade and payment. The bottom line is that credit is an important part of the transmission process of Nigerian Monetary Policy.

TO VIEW THE FULL CONTENT OF THIS DOCUMENT, PLEASE VISIT THE DIGITAL LIBRARY WEBSITE USING THIS LINK, http://naulibrary.org/dglibrary/admin/book_directory/Banking_and_finance/11263.pdf

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