Digital Currency, Monetary Policy and Economic Growth in Nigeria

Abstract

This study has investigated the structural effect of digital currency and monetary policy on Economic growth in Nigeria using Structural Vector Autoregressive (SVAR) Model for the period 2013Q1 to 2020Q4.The properties of the data were first checked to avoid spurious regression and misspecification of the model by using the ADF and PP unit-root tests. The findings demonstrate that all variables are integrated at the order of zero (I(0)) and that digital currency has no any significant impact on economic growth, while the monetary policy variables, namely money supply, monetary policy rate, do have shock effect on economic growth in Nigeria, with a shock to money supply having a much more significant and positive impact on economic growth, while the response of economic growth to one unit standard deviation shock to monetary policy rate is negative and insignificant. This implies that monetary policy rate does not have much impact on economic growth in Nigeria. The findings recommend that the use monetary policy rate should be reduced by the monetary authorities, so as to encourage investors invest more in the economy to propel growth. Also the Nigerian monetary authorities expedite action towards the much needed monetary control which can be achieved via efficient money supply regulatory monetary measures.