Implications Financial Development on Economic Growth in Nigeria: Vector Error Correction Model

Odo, Stephen Idenyi and Eze, Onyekachi R. and Onyeisi, Ogbonna Samuel (2015) Implications Financial Development on Economic Growth in Nigeria: Vector Error Correction Model. International Research Journal of Finance and Economics (104). pp. 96-111. ISSN 1450-2887

	Text Eze et all-Implications Financial Development on Economic.pdf Download (174kB)
	Text Eze et all-Implications Financial Development on Economic.pdf Download (174kB)

Abstract

The general objective of this study is to evaluate the relationship between financial development and economic growth in Nigeria from 1980-2013. The study made use of cointegration techniques and vector error correction model. The study observed that there exist a long run equilibrium relationship between financial development and economic growth in Nigeria, that ratio of broad money supply to GDP have no significant implication on economic growth in Nigeria, ratio of domestic credit to private sector to GDP have no significant implications on economic growth in Nigeria and that the causal relationship between financial development and economic growth indicated that ratio of Domestic Credit to the Private sector granger cause the economy. In the estimation of VECM, the error correction term indicated that the system corrects its previous disequilibrium at a speed of 74.6% each year. The policy implications of the findings shows that government should encourage the monetary authority like the central bank of Nigeria to reduce interest rate thereby increasing money supply so that prospective investors can increase their investment and raise the nation’s production capacity. Based on the findings, we recommend that considering the ratio of broad money supply to GDP which has no significant impact on economic growth within the period under study, government should encourage the monetary authority like the central bank of Nigeria to reduce interest rate thereby increasing money supply so that prospective investors can increase their investment and raise the nation’s production capacity.

Item Type:	Article
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HJ Public Finance
Divisions:	Faculty of Management and Social Sciences
Depositing User:	mrs chioma hannah
Date Deposited:	27 May 2019 13:09
Last Modified:	27 May 2019 13:09
URI:	http://eprints.gouni.edu.ng/id/eprint/1576

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