Asymmetric Effects of Monetary Policy Shocks on Output Growth in Nigeria: A Sectoral Analysis

In this study, the asymmetric effects of monetary policy on real output both at aggregate and disaggregate levels in Nigeria were scrutinized using data sourced from the Central Bank of Nigeria Statistical Bulletin and Bureau of Statistics. Data for the study was analysed with the nonlinear Autoregressive Distributed Lag (ARDL) and Structural Vector Autoregressive Model (SVAR). The study decomposed money supply (MS) and monetary policy rate (MPR) into positive and negative in order to capture expansionary and contractionary monetary policies. The real output was proxied by Gdpgr. Results from long-run nonlinear ARDL showed long-run co-movement between monetary policy variables and real output both at aggregate and sectoral levels. Results obtained from further empirical estimations showed that the response of real output to shocks emanating from both positive and negative monetary policies was significant with different magnitudes. While the response of output growth rate to shocks from positive monetary policy was significant but negative, its response to shocks from negative monetary policy was positive and significant. It was equally noted in our analysis that positive monetary policy shocks to domestic interest reduces the exchange and output growth rate both at aggregate and sectoral levels. However, the effects of negative monetary policy were wider than that of positive effects. This shows that negative monetary policy would be more efficacious when output is desired to be increased. Results from variance decomposition revealed that, among variables employed in the study, money supply and monetary policy rate explained much of the variations in Nigeria’s real output. Based on these findings, the study, therefore, concludes that the effects of monetary policy on real output are asymmetric and not symmetric.