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Exchange, Interest and Inflation Rates and the Economic Growth: Nigerian Perspective (1981 – 2018)
Authors: Obi, Chineze Eunice
Number of views: 42
The paper examined the domestic monetary and fiscal policy effects of interest rate inflation rate and exchange rate on the
economy for the period 1981-2018. The study adopted Dickey –fuller test and the Johansen’sCointegeation test. The result
of Johansen showed that there exist relationship between the variable over the entire period,though in the short –run there
was deviation from the equilibrium. The existence of one cointegrating equation was identied,therefore, a stable
equilibrium relationship was present. The coefficients result was that 1% increase in the interst rate led to 0.002%
increase in growth rate, in the long run interest rate had positive impact on growth rate. The study also used Granger
Causality test to examine relationship between interest rate and inflation rate, GDP and real growth rate. Results were
that interest rate causes inflation and interest rate cause granger growth rate, while growth rate granger cause GDP. The
result of Arch and Garch showed volatility shock, which were quite persisent so that a large excess return value of either
positive or negative, which will lead future forceasts of high interest and exchange rate for a prolonged period of time.
This forceast of future high interest and inflation rates will not aurgor well for use in the budget preparation, since they
will reflect use budget defict or surplus that will require external borrowing.
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