EFFECT OF MONETARY POLICY ON THE RATE OF UNEMPLOYMENT IN NIGERIAN ECONOMY(1986-2018)
Keywords:
Cash Reserve Ratio, Exchange Rate, Liquidity Ratio, Monetary Policy, Monetary Policy Rate, Money Supply, UnemploymentAbstract
This study examines the effect of monetary policy instruments on unemployment in Nigeria (1986-2018) using secondary data from Statistical bulletin of Central Bank of Nigeria(2020)Specific objectives of the study is to find out the effect of monetary policy rate, broad money supply, exchange rate, liquidity ratio and cash reserve ratio on unemployment. The study adopted an Autoregressive Distributed Lag technique and also conducted the unit root and co-integration test. The study found that cash reserve ratio and monetary policy rate had positive and insignificant effect on the employment rate in Nigeria, broad money supply had positive and significant effect on the employment rate in Nigeria, exchange rate and liquidity ratio had negative and significant effect on the employment rate in Nigeria. The study concludes that monetary policy has significant effect on the rate of unemployment. Based on the findings made in the course of this study, the study recommends that the Monetary policies should be used to create a favourable investment climate by facilitating the emerging of market based interest rate and exchange rate administration that will attract both domestic and foreign investments and create jobs, Government should build an effective and sustained low interest rate intervention fund to support the real sector, especially small and medium enterprises. Hence, it is recommended that policy makers in Nigeria should focus invariably on the adjustment of interest rate when considering unemployment in its monetary policy decisions.
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