Can monetary policy enhance remittances for economic growth in Africa? The case of Nigeria

Mbutor O. Mbutor

Research Department of the Central Bank of Nigeria, Abuja.

E-mail: mbukor@yahoo.co.uk.

Accepted 30 June, 2010

 Abstract

Remittances are a vital component of liquidity flows in Nigeria. This paper evaluates the role of monetary policy in enhancing remittances for economic growth. The vector autoregressive methodology is applied with two stage deductions. The monetary policy rate first impacts intervening variables- exchange rate, interest rate, inflation etc- which in turn impact remittance flows. The data set are tested for temporal properties, including unit roots and co-integration. Preliminary evidence shows that domestic economic prosperity increases remittances to Nigeria; while exchange rate depreciation depresses remittances. The latter outcome reflects remitters’ perception that a stronger Naira is a sign of things-getting-better-back-home. 

Key words: Monetary policy, remittance, vector autoregression