Monetary Policy and Unemployment Rate in Nigeria: 1990 -2016

Abstract

The main objective of this study was to further investigate the presence of causality from monetary policy to unemployment in Nigeria. Quarterly time series data between 1990 to 2016 were sourced from the CBN and NBS. Unemployment (U) was made the regressand and monetary policy instruments as the regressors. The monetary instruments used were broad money supply (M2), monetary policy rate (Mpr), cash requirement ratio (Cr) and Liquidity ratio (Lr). Inflation (P) and gross domestic product (Y) were added to represent macroeconomic variables. The techniques of vector autoregressive model (VAR) and granger causality were
employed. Findings from the study showed that monetary policy instruments did not individually granger cause unemployment rate but its joint instruments did; The study divulged that unemployment did not respond significantly to changes in monetary policy. The study suggests that when combating unemployment menace, the monetary authority should employ all four instruments at the same time since joint uses of these instruments are more effective. The CBN should strive to make Nigeria a cashless economy through the general use of Automated Teller Machine (ATM) and Point of Sales (POS), for more patronage of banking services.