MEASURING THE ASYMMETRIC PASS-THROUGH OF MONETARY POLICY RATE TO UNEMPLOYMENT IN NIGERIA: Evidence from Nonlinear ARDL
- Gideon G. Goshit
- Paul Terhemba Iorember
- ( paper pages. 336 - 369 )
Abstract
Given the persistent rise in the rate of unemployment in Nigeria over time despite the frequent changes in the monetary policy rate (MPR) and the fact that most studies in the literature simply assume a linear relationship in considering the pass-through of monetary policy instruments to unemployment, the current study investigated the asymmetric pass-through of monetary policy rate to unemployment in Nigeria using the asymmetric ARDL model over the period 2000Q1–2018Q4. The study found dissimilar long-run effects of tightening and easing the MPR on unemployment. While tightening the MPR had positive, elastic and statistically significant effect on unemployment, implying complete pass-through, easing the MPR had negative, inelastic and statistically insignificant effect on unemployment, suggesting incomplete pass-through. Similarly, the short-run effects of tightening or easing the MPR were dissimilar. Furthermore, the result of the cumulative multiplier indicated that the cumulative effects of tightening the MPR on unemployment dominated the cumulative effects of easing the MPR on unemployment in Nigeria. It is therefore recommended that to curb unemployment using the interest rate channel, the monetary authority (Monetary Policy Committee) should ease the MPR by a higher magnitude compared to the magnitude that is required to tighten it for the purpose of price stability.
Citation
Gideon G. Goshit, Paul Terhemba Iorember.
2020.
"MEASURING THE ASYMMETRIC PASS-THROUGH OF MONETARY POLICY RATE TO UNEMPLOYMENT IN NIGERIA: Evidence from Nonlinear ARDL"
The Nigerian Journal of Economic and Social Studies,
62 (3): 336 - 369.
JEL Classification
E5, J16, C32
