The Dynamic Causality between Money and Macroeconomic Activity:Empirical Evidence from Nigeria (1960-2011) (Penyebab Dinamik antara Wang dengan Aktiviti Makroekonomi: Bukti Empirikal dari Nigeria(1960-2011))

Tajudeen Mukhtar Olatunji, Adedokun Adebayo Sunday, Yaqub Jameelah Omolara

Abstract


ABSTRACT

This paper examines the dynamic causality between money and macroeconomic activities (output, interest rate, exchange rate and prices) in Nigeria between 1960 and 2011. The methodologies applied include the multivariate cointegration test developed by Johansen (1988) and Johansen and Juselius (1990), the Granger causality test in vector error correction model (VECM), impulse response function (IRF) and variance decomposition (VDC) method. The cointegration test indicates that a long run relationship exists among the macroeconomic variables. The VECM results show that, in the short-run, real GDP and money supply stand out econometrically exogenous, whereas the presence of causal relationships among the variables shows that money supply is not neutral in the short-run. There are unidirectional short-run relationships running from (1) broad money to price, (2) money supply to interest rate and (3) narrow money to exchange rate. The IRF indicates that a positive money shock would increase output and prices, while decreasing interest rates. The exchange rate, however, will remain relatively unchanged and stable for the first two years before decreasing. Considering the definitions of money stocks, broad money (M2) appears to have a stronger causal effect on real output than narrow money (M1). The VDCs show that money supply contains better information about the source of shocks that is affecting the economy when compared to others variables. This implies that money supply could be very useful for predicting the current and future growth rate in output and prices in the Nigerian economy. The Granger causal chain implies that the findings are consistent with the quantity theory of money as opposed to other economic paradigms. However, it also suggests that monetary policy alone is insufficient to achieve sustainable economic growth and price stability.

ABSTRAK

Kajian ini menguji hubungan penyebab dinamik antara wang dengan aktiviti ekonomi (output, kadar faedah, kadar tukaran dan harga) di Nigeria antara tahun 1960 hingga 2011. Metodologi yang digunakan termasuk ujian kointegrasi multivariat yang dikemukakan oleh Johansen (1988) dan Johansen dan Juselius (1990), ujian penyebab Granger dalam model pembetulan ralat vektor (VECM), fungsi tindak balas teritlak (IRF) dan kaedah penguraian varians (VDC). Ujian kointegrasi menunjukkan wujud hubungan jangka panjang antara pemboleh ubah makroekonomi. Dapatan dari VECM menunjukkan yang dalam jangka pendek, KDNK sebenar dan penawaran wang secara ekonometrik jelas bersifat exogenous. Sementara itu, kewujudan hubungan penyebab antara pemboleh ubah menunjukkan penawaran wang tidak bersifat neutral dalam jangka pendek. Didapati wujud hubungan jangka pendek satu hala yang datangnya dari (1) wang luas kepada harga, (2) penawaran wang kepada kadar faedah dan (3) wang sempit kepada kadar tukaran. Hasil IRF pula menunjukkan bahawa kejutan positif dalam wang akan meningkatkan output dan harga, tetapi menurunkan kadar faedah. Kadar tukaran bagaimana pun secara relatif tidak berubah dan stabil untuk dua tahun pertama sebelum ia mula menurun. Dengan mengambil kira definisi stok wang, kesan penyebab wang luas (M2) ke atas output sebenar didapati lebih kuat berbanding wang sempit (M1). Hasil analisis VDC menunjukkan yang penawaran wang mempunyai maklumat mengenai sumber kejutan yang mempengaruhi ekonomi yang lebih baik berbanding pemboleh ubah lain. Ini menunjukkan penawaran wang boleh digunakan untuk meramalkan kadar pertumbuhan semasa dan masa depan bagi output dan harga dalam ekonomi Nigeria. Rantaian penyebab Granger menunjukkan penemuan kajian ini adalah selari dengan teori kuantiti wang, berbanding paradigm ekonomi yang lain. Bagaimanapun, penemuan tersebut juga menyarankan bahawa polisi monetari secara solo tidak memadai untuk mencapai kelestarian dalam pertumbuhan ekonomi dan kestabilan harga.


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