Spill-over Effects of United States Monetary Policy on Macroeconomic Stability in Nigeria

Abstract

The monetary policy pronouncement and implementation by the US may have implication for macroeconomic stability in Nigeria. The objective of the paper was to examine US monetary policy spill-over on macroeconomic stability in Nigeria.To achieve this objective the stochastic properties of the data were examined. The optimal lag length selection criteria were used to select the optimal lag length for the model, while the impulse response functions were generated from the Bayesian VAR to determine the innovation from US monetary policy to macroeconomicstability in Nigeria.The findings vary by the type of macroeconomic variable under consideration. MPR and OPS had the greatest negative impacts following innovation from US monetary policy, while ER, CPI and IBCR had slightly negative impacts following the innovation and GDPGR had the least negative impact. Generally, the negative impacts are greater in quarters and magnitudes than the positive impact following US monetary policy innovation. The findings may beuseful for macroeconomic policymaker as this may be required to understand the spill-over effects – direction and magnitude of innovations and then can plan for a macroeconomic policy coordination and then intervention to deal with the spill-over effects.