International Journal of Academic Research in Business and Social Sciences

search-icon

Interactive Mechanism of Money Supply and Economic Growth: Analysis of the Causal Relationship in Nigeria

Open access
This study employs the cointegration technique and the granger causality test to examine the impact and the causal relationship between money supply and economic growth in Nigeria using annual time series data spanning 1980 to 2017. After critical exploration of both the theoretical and the empirical literature, the study concludes that money supply has a positive impact on economic growth. This is evidenced by the presence of cointegrated and long-run relationship among the variables. In addition, the Granger causality test shows the existence of unidirectional causality running from money supply to economic growth, hence result is consistent with numerous empirical literature. As such, government should put in place other policy measures that would encourage the effective workings of money supply in Nigeria. This may include proper engagement of monetary management to ensure that increase money supply does not lead to economic disorder in the long-run.
Ahmed, A. E. M., & Suliman, S. Z. (2011). The long-run relationship between money supply, real GDP, and price level: Empirical evidence from Sudan. Journal of Business Studies Quarterly, 2(2), 68-79.
Amassoma, D., Sunday, J., & Onyedikachi, E. (2018). The influence of money supply on inflation in Nigeria. Journal of Economics and Management, 31(1), 05-23.
Anyanwu, U. N., & Kalu, A. O. U. (2015). The impact of statutory money supply management and commercial bank loans and advances (CBLA) on economic growth: An empirical evidence in Nigeria. Arabian Journal of Business and Management Review (Nigerian Chapter), 3(5), 01-18.
Aslam, A. L. M. (2016). Impact of money supply on Sri Lankan economy: An econometric analysis. International Letters of Social and Humanistic Sciences, 67, 11-17.
Aslam, A. L. M., & Lebbe, S. M. A. (2015). The relationship between money stock and economic growth of Sri Lanka: An AEG testing approach. 5th International Symposium 2015 – IntSym 2015, SEUSL.
Behera, J. (2016). Dynamics of inflation, economic growth, money supply and exchange rate in India: Evidence from multivariate analysis. Quarterly Journal of Econometrics Research, 2(2), 42-54.
Bonga, W. G. (2015). Is Increased Money Supply a Solution to Boost Zimbabwe Economic Growth Path? Social Science Research Network (SSRN).
Available at: http://ssrn.com/abstract=2696669
Brooks, C. (2008): Introductory Econometrics for Finance (2nd edition). ICMA Center University of reading; Cambridge university press; New York.
Canetti, E., & Greene, J. (2000). Monetary growth and exchange rate depreciation as causes of inflation in African Countries. International Monetary Fund, Washington, D.C.: World Bank Working Paper.
Chaitip, P., Chokethaworn, K., Chaiboonsri, C., & Khounkhalax, M. (2015). Money supply influencing on economic growth-wide phenomena of AEC open region. Procedia Economics and Finance, 24 108-115.
Denbel, F. S., Ayen, Y. W., & Regasa, T. A. (2016). The relationship between inflation, money supply and economic growth in Ethiopia: Cointegration and causality analysis. International Journal of Scientific and Research Publications, 6(1), 556-565.
Dingela, S., & Khobai, H. (2017). Dynamic impact of money supply on economic growth in South Africa. An ARDL approach. Munich Personal RePEc Archive (MPRA), MPRA paper no. 82539.
Ditimi, A., Sunday, K., & Onyedikachi, E. O. (2017). The upshot of money supply and inflation in Nigeria. Valahian Journal of Economic Studies, 8-22(2), 75-90.
El-Seoud, M. S. A. (2014). Testing the relationship between money supply and GDP in Bahrain.International Journal of Economics, Commerce and Management, II(5), 01-16.
Gatawa, N. M., Abdulgafar, A., & Olarinde, M. O. (2017). Impact of money supply and inflation on economic growth in Nigeria. IOSR Journal of Economics and Finance (IOSR- JEF), 8(3/4), 26-37.
Georgantopoulos, A. G., & Tsami, A. D. (2013). The interrelationship between money supply, prices and government expenditures and economic growth: A causality analysis for the case of Cyprus. International Journal of Economic Sciences and Applied Research, 5(3), 115-128.
Gujarati, D. N., & Porter, D. (2009). Basic Econometrics, 3rd edition. US: The McGraw-Hill
Harding, D., & Pagan, A. (2001). Extracting, analysing and using cyclical information. MPRAPaper No.15
He, Y. (2016). A study on the relationship between money supply and macroeconomic variables in China. Mediterranean Journal of Social sciences, 8(6), 99-107.
Hussain, M. E., & Haque, M. (2017). Empirical analysis of the relationship between money supply and per capita GDP growth rate in Bangladesh. Journal of Advances in Economics and Finances, 2(1), 54-66.
Hussain, M. I, & Zafar, T. (2018). The interrelationship between money supply, inflation, public expenditure and economic growth. European Online Journal of Natural adSocial Sciences, 7(1), 01-24.
Ifionu, E., & Akinpelumi, O. F. (2015). Macroeconomic Variables and Money Supply: Evidence from Niger
In-Text Citation: (Idris, 2019)
To Cite this Article: Idris, M. (2019). Interactive Mechanism of Money Supply and Economic Growth: Analysis of the Causal Relationship in Nigeria. International Journal of Academic Research in Business and Social Sciences, 9(7), 324–338.