EFFECTS OF MONETARY POLICY ON BANKS ASSET PORT FOLIO BEHAVIOUR: EVIDENCE FROM NIGERIAN ECONOMY

Marius N. Ugochukwu, Mercy O. Nwosu

Abstract


This research study examined the effects of monetary policy on bank's asset portfolio behaviour in the Nigerian economy. The purpose of this study was to investigate the nature of relationship between monetary policy instruments and growth rate in total Bank asset portfolio behaviour. In course of this study, secondary data were sourced from the Central Bank of Nigeria Statistical Bulletin, the granger causality test and the Johansen co-integration test in a Vector Error Correction Model (VECM) setting were employed. The empirical result demonstrate that there exists a long-run equilibrium relationship between monetary policy tools such as Cash Reserves Ratio (CRR), Loan to Deposit Ratio (LDR), Liquidity Ratio (LQR) and Rates (MRR) and Treasury Bill Rates (TBR) have no significant impact on Growth rate in total bank assets portfolio. The study also showed that, there is no granger causality between the dependent variable Growth in total bank asset" portfolio behaviour and the independent variable such as Minimum Rediscount Rates, Cash Reserves Ratio, Loan to Deposit Ratio and Liquidity Ratio within the period under study. It was recommended that monetary policy tools should be used for the purpose of achieving Quality Asset Portfolio Behaviour (QAPB).

Keywords


Monetary Policy, Bank Assets Portfolio, Nigerian Economy and Central Bank of Nigerian Bulletin

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