EuroEconomica, Vol 36, No 2 (2017)

Abstract

The study investigated the long and short run relationships between broad money supply and real aggregate output (GDP) in Nigeria from 1981 to 2015. This study set to investigate the perplexity whether or not money supply as the major monetary policy measures actually impact on the Nigerian economy. This work made use of data of different frequencies (yearly and quarterly) in order to reveal some hidden facts that data of the same frequency might fail to show. An unrestricted version of Mixed Data Sampling (U-MIDAS) technique and Autoregressive Distributed Lag (ARDL) technique were employed. The ADF unit root test revealed that the yearly real GDP and quarterly broad money supply contained a unit root and this permit the testing of cointegration among the variables. The U-MIDAS results affirm the existence of a long and short-run relationship between yearly real GDP and quarterly broad money supply at different season while the ARDL result affirm that money supply impacted significantly on real GDP in the long run only. The study concluded that the disequilibrium correction terms from the two analytical approaches showed the evidence that there is a tendency for growth targeting in Nigeria which is one of the major objectives of Nigeria economy though at a slower rate. It was therefore recommended that monetary authority should maintain the level of inflation targeting in the economy and the volume of money to be supply should be monitored as too much money supply in the economy will lead to skyrocketing inflation and also the periodic money multiplier should be made efficient by supplying the money into the circulation regularly so as to co-trend with the real GDP growth by making cash available for business transactions and other economic activities, this will by means improve the real GDP of Nigeria economy.