Emergence of the New Monetary Policy Mandates and Macroeconomic Shocks in Nigeria: A VAR framework
Abstract
Macroeconomists and policymakers worldwide have given critical attention to the introduction of new monetary policy mandates to envisage and address the economic shock perceived in most developed and developing nation. Part of the reason for this attention is to incorporate unemployment and poverty reduction in the core mandate of the monetary authority. While many scholars have contended that this approach to monetary policy is inappropriate, since the major obligation is to maintain financial stability and bank supervision among other objectives, others have welcomed the proposition as an option to use credit allocation, capital management and interest rate as yardstick for achieving this new role. This study examined the emergence of this new mandate, with specific focus on the Nigerian economy between 1971 and 2014, using the vector autoregressive approach to estimate the interaction and feedback mechanism to check the connection between monetary policy instrument and the new mandate of unemployment and poverty reduction. Based on the findings, it recommended the use of conventional and unconventional monetary policies as option s for reducing unemployment and poverty in Nigeria.
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