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An investigation of the
relationship between interest rates and economic growth in
Nigeria, 1970 - 2006
T. M. Obamuyi
Adekunle
Ajasin University, Akungba-Akoko, Ondo State, Nigeria.
E-mail: tomolaobamuyi@yahoo.co.uk.
Tel: +234 805 350 0258.
Accepted 25 June, 2009 |
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The
paper investigates the relationship between interest rates
and economic growth in Nigeria, using time series analysis
and annual data from 1970 - 2006. The co-integration and
error correction model were used to capture both the
long-run and short-run dynamics of the variables in the
model. The empirical results indicate that real lending
rates have significant effect on economic growth. There also
exists a unique long-run relationship between economic
growth and its determinants, including interest rate. The
results imply that the behaviour of interest rate is
important for economic growth in view of the relationships
between interest rates and investment and investment and
growth. Thus, the formulation and implementation of
financial policies that enhance investment-friendly rate of
interest is necessary for promoting economic growth in
Nigeria.
Key
words:
Interest rates, economic growth, financial reforms. |
