Asymmetric Effects of Money Supply Growth on Economic Growth in Nigeria

Abstract

The study employs the Shin-Greenwood-Yin nonlinear autoregressive distributed lag (NARDL)
approach to cointegrating and error correction modeling to examine the asymmetric effects of broad money
growth on economic growth in Nigeria. Annual time series data spanning the period from 1981-2016 are used
for the analysis. The study finds asymmetric relationship between the variables in the short run as positive
change in broad money growth is found affect economic growth positively and significantly, while negative
change is found to have negative, but more sizable and more significant effect on growth. The study also finds
no significant effect of positive change in broad money growth on economic growth in the long run. Negative
change in broad money growth positively and significantly affects economic growth in the long run. Further
evidence from the study are that growth in government financial consumption expenditure positively affects
economic growth in the short- and long-run, while inflation adversely affect growth in both time horizons.
Based on the evidence, it is recommended that to achieve long run growth, growth of money supply and
inflation should be controlled, and government final consumption expenditure should be increased to boost
economic activities.