Monetary Policy Shocks and Inclusive Growth in Nigeria: A VAR Approach

Abstract

The importance of monetary policy to an economy has made its effectiveness very potent in achieving economic growth in both developed and developing countries, this is because, an effective monetary policy is crucial for sustainable development and economic stability. Hence, this study will among other things investigate the relationship between monetary policy shocks and inclusive growth in Nigeria. With many of the macroeconomic models for measuring the effect of monetary policy on an economy lacking the analytical specificity to account for the importance of shocks on aggregate economy. This study, with the introduction of inclusive growth as a new variable, used a developed model with advanced empirical and quantitative methodology to study monetary policy shocks and inclusive growth in Nigerian economy. Usually, VAR is more applicable to analyzing the linkage among monetary policy variables. Hence, while this study will obtain a new evidence for this relationship, it is expected in Nigeria, that an effective monetary policy will encourage inclusive growth; stabilize inflation and maintain macroeconomic stability in the economy.