Monetary Policy In Nigeria Essay
BACKGROUND OF STUDY.
Rapid and sustainable economic growth (and financial development) remains the quest of every economy frontier, emerging and developed inclusively. Among the various drivers of economic growth, two important drivers of sustainable economic growth and development in any country are Effective Monetary policy and a Vibrant Capital market.
Monetary policy is a measure designed to influence the availability, volume and direction of money and credits to achieve the desired economic objectives. In Nigeria, the authority to carryout monetary policy is vested in the central bank of Nigeria (CBN) through decrees 24 and 25 1991. (godwin 2010)
Monetary policy is the part of economic policies that regulates the level of money and liquidity
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Whether monetary policy influences the stock market performance has become an issue of continuous debate and controversy in financial literature. Though, monetary policies are implemented through financial institutions of which the stock market is one. The high liquidity generated on daily basis at the stock exchange market has poised the central bank and monetary policy managers to believe that the capital market is an appropriate avenue for monetary policy implementation in order to bring stability in the economy. Whether this believe is correct, has also become a financial assets by adjusting too, to many economic conditions and government and matter of importance to financial researchers can only be supported by an empirical research finding to possibly establish how equity prices, market capitalization, and other determinants of stock market performance react to changes in interest rate , exchange rate and money supply. Similarly, it is arguable that monetary policy should exert significant influence on stock market. This, as a matter of fact should also manifest in the behavioral relationship of equity prices movement and monetary policy rate adjustment in the economy.
Ariyo and Adelegan (2005) contend that, the liberalization of
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The renewed efforts from the monetary and fiscal authorities in 2017 are greatly responsible for this performance. Proshare research (2017) The effects of monetary policy instruments such as interest rate, Money supply and foreign exchange rate on the activities / performance in the capital market can not be underwritten. This study seeks to deeply investigate the issues facing monetary policies and stock market activities and their overacting effect on the economic growth of Nigeria.
Aliyu (2012) Monetary policy management is a routine thing, while the desire to attain a specific macroeconomic objective often conflicts with the attainment of other competing objectives. More so, financial integration and unrestricted trade flows exert influences on domestic financial policies. It is, therefore difficult, especially given the above theoretical underpinning, to disentangle the conduct of monetary policy from events at the global and domestic stage/ economy and the Nigerian Stock exchange market (NSE) in
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