Assessing the Dynamic Innovations of Sele Monetary Policy Measures on General Investment in Nigeria: A VAR Approach

The paper focused on appraising the dynamic innovations of sele monetary policy measures on general investment in Nigeria. Monetary policy measures remain central in promoting general economic stability. Thus, the paper has primarily investigated the dynamic innovations of selected monetary policy measures (real interest rate and money supply) on investment growth in Nigeria. The variables employed are money supply as dependent variable, interest rate and investment as independent variables. The Augmented Dickey Fuller (ADF) Test result reveals that all the variables tested were not stationary at level I(0) but stationary at first difference I(1). Time series data from 1980-2022 period was used to estimate the relationship, using the VAR approach. Forecast error variance decomposition and impulse response functions were estimated to examine the dynamic effects of various innovations (shocks) on investment growth. The data used were sourced directly from Central Bank of Nigeria Statistical Bulletin. Inverse of roots of VAR characteristic Polynomial shows that the model is stable. The results reveal that fundamental shocks of investment variable are associated with its own innovation and that of real interest rate and money supply. The study thus recommends appropriate interest rate policies and periodic increase in money supply to stimulate and sustain investment growth in Nigeria.