Acta Universitatis Danubius. Œconomica, Vol 13, No 6 (2017)

Abstract

This study investigates the efficiency of monetary policy in Nigeria through the use of the Data Envelopment Analysis (DEA) approach for the periods 1980 – 2015. Through this method, we obtain efficiency scores for the input-output relationship of monetary policy instruments for each of the year and for the whole years. Using scenario analyses through sensitivity analysis, we determine the allowable reductions and additions to this instruments that would make monetary policy to reach optimum and impact meaningfully on the economy. It is important to note that the input variables are the treasury bills and treasury certificates while interest rate and monetary base constitute the output variables. Also, the study proceeded to examine what impact that monetary policy has on inclusive growth in the country using a Structural Vector Auto-Regression (SVAR) model. More so, the actual inflation rate was fitted to its targeted rate for the period under investigation for robustness sake. The striking finding for this study is that even though it has not been efficient, monetary policy in Nigeria requires some allowable adjustments before efficiency can be attained and, thus, impact on inclusive growth. More so, the results obtained through the SVAR framework indicate that the shocks from money supply and financial openness substantially impact on inclusive growth. It sums up to mean that, even though non-neutral, monetary policy has not been efficient in driving inclusive growth in Nigeria.