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Title: | Causalities between financial and real sector variables in Nigeria: a comparison of results from Granger's and Sims' tests |
Author: | Odedokun, M.O. |
Year: | 1987 |
Periodical: | The Nigerian Journal of Economic and Social Studies |
Volume: | 29 |
Issue: | 3 |
Pages: | 381-394 |
Language: | English |
Geographic term: | Nigeria |
Subjects: | econometrics monetary policy economic development |
Abstract: | Monetary policy is conducted in the financial sector with a view to getting its effect transmitted to the real sector. Economists are divided, however, as to the magnitude of the effects of monetary policy on the real sector. On the one side are Keynesians, who contend that monetary policy has very little effect. On the other side, the monetarists are of the opinion that monetary policy does have an impact on the real sector. This paper examines the existence, in Nigeria's economy, of causalities between the various measures of monetary policy actions (viz.: total domestic credit, monetary base, narrow money, and wider money) and the various measures of the state of the economy (viz.: industrial production, price level, imports, and GDP) which the monetary actions might aim at. The objectives are to shed light on the controversies between the monetarists and Keynesians as to the direction of causation; to improve the model building process and enhance the conduct of monetary policy in Nigeria; and to contribute to the econometric issue as to whether or not the two causality tests of Granger (1969) and Sims (1972) produce the same results. The author used quarterly data for Nigeria over the period 1971-1985 and both the Granger's and Sims' test procedures. The findings, in almost all cases, contradict the monetarist position. In most cases, the two tests unanimously support the hypothesis of an absence of causality. Bibliogr., notes. |