Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model

Olufemi Ademola; Samson Alalade; Peter Ogbebor; Olalekan Aworinde

doi:doi:10.11648/j.ijefm.20231106.12

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Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model

Olufemi Ademola^*, Samson Alalade, Peter Ogbebor, Olalekan Aworinde

Published in International Journal of Economics, Finance and Management Sciences (Volume 11, Issue 6)

Received: 1 November 2023 Accepted: 17 November 2023 Published: 24 November 2023

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Abstract

Researchers continue to debate the effect of interest rates on economic growth. While some argue that the high interest hurt the economy and high borrowing cost discourages capital investments, others argue that the moderating effect of high interest rate on inflation leads to a positive real growth in the economy. In the bid to test the effect of interest rate on the economic growth, this study examined the nexus between interest rate and real gross domestic product (GDP) growth in Nigeria. To act as counterbalances, the study also introduced money supply and institutional quality as proxies for interest rate. The research is based on ex-post facto research design using a time series data of 68 quarters from 2006Q1 to 2022Q4). The Autoregressive Distributed Lag (ARDL) model was utilized to assess the effect of interest rate on real GDP growth in Nigeria. The study found that interest rate has long-run significant cointegrating relationship with real GDP growth rate (Adj R2 = 0.44; F-stat (4, 63) = 18.55 p < 0.05). The study concluded that interest rate is a significant factor influencing real GDP growth in Nigeria and that maintaining a stable lending rate is one of the basic requirements for developing countries to attain high level of economic growth. The study thus recommends that as a short-term economic tool, the policymakers may use interest rates to stimulate real growth in GDP in addition to the implementation of appropriate fiscal reforms to stimulate economic activities and support growth.

Published in	International Journal of Economics, Finance and Management Sciences (Volume 11, Issue 6)
DOI	10.11648/j.ijefm.20231106.12
Page(s)	300-310
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2023. Published by Science Publishing Group

Keywords

Interest Rate, Economic Growth, Money Supply, Institutional Quality, Real GDP Growth

References

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Ademola, O., Alalade, S., Ogbebor, P., Aworinde, O. (2023). Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model. International Journal of Economics, Finance and Management Sciences, 11(6), 300-310. https://doi.org/10.11648/j.ijefm.20231106.12

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ACS Style

Ademola, O.; Alalade, S.; Ogbebor, P.; Aworinde, O. Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model. Int. J. Econ. Finance Manag. Sci. 2023, 11(6), 300-310. doi: 10.11648/j.ijefm.20231106.12

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AMA Style

Ademola O, Alalade S, Ogbebor P, Aworinde O. Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model. Int J Econ Finance Manag Sci. 2023;11(6):300-310. doi: 10.11648/j.ijefm.20231106.12

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@article{10.11648/j.ijefm.20231106.12,
  author = {Olufemi Ademola and Samson Alalade and Peter Ogbebor and Olalekan Aworinde},
  title = {Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {11},
  number = {6},
  pages = {300-310},
  doi = {10.11648/j.ijefm.20231106.12},
  url = {https://doi.org/10.11648/j.ijefm.20231106.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20231106.12},
  abstract = {Researchers continue to debate the effect of interest rates on economic growth. While some argue that the high interest hurt the economy and high borrowing cost discourages capital investments, others argue that the moderating effect of high interest rate on inflation leads to a positive real growth in the economy. In the bid to test the effect of interest rate on the economic growth, this study examined the nexus between interest rate and real gross domestic product (GDP) growth in Nigeria. To act as counterbalances, the study also introduced money supply and institutional quality as proxies for interest rate. The research is based on ex-post facto research design using a time series data of 68 quarters from 2006Q1 to 2022Q4). The Autoregressive Distributed Lag (ARDL) model was utilized to assess the effect of interest rate on real GDP growth in Nigeria. The study found that interest rate has long-run significant cointegrating relationship with real GDP growth rate (Adj R2 = 0.44; F-stat (4, 63) = 18.55 p < 0.05). The study concluded that interest rate is a significant factor influencing real GDP growth in Nigeria and that maintaining a stable lending rate is one of the basic requirements for developing countries to attain high level of economic growth. The study thus recommends that as a short-term economic tool, the policymakers may use interest rates to stimulate real growth in GDP in addition to the implementation of appropriate fiscal reforms to stimulate economic activities and support growth.
},
 year = {2023}
}

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TY  - JOUR
T1  - Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model
AU  - Olufemi Ademola
AU  - Samson Alalade
AU  - Peter Ogbebor
AU  - Olalekan Aworinde
Y1  - 2023/11/24
PY  - 2023
N1  - https://doi.org/10.11648/j.ijefm.20231106.12
DO  - 10.11648/j.ijefm.20231106.12
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 300
EP  - 310
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20231106.12
AB  - Researchers continue to debate the effect of interest rates on economic growth. While some argue that the high interest hurt the economy and high borrowing cost discourages capital investments, others argue that the moderating effect of high interest rate on inflation leads to a positive real growth in the economy. In the bid to test the effect of interest rate on the economic growth, this study examined the nexus between interest rate and real gross domestic product (GDP) growth in Nigeria. To act as counterbalances, the study also introduced money supply and institutional quality as proxies for interest rate. The research is based on ex-post facto research design using a time series data of 68 quarters from 2006Q1 to 2022Q4). The Autoregressive Distributed Lag (ARDL) model was utilized to assess the effect of interest rate on real GDP growth in Nigeria. The study found that interest rate has long-run significant cointegrating relationship with real GDP growth rate (Adj R2 = 0.44; F-stat (4, 63) = 18.55 p < 0.05). The study concluded that interest rate is a significant factor influencing real GDP growth in Nigeria and that maintaining a stable lending rate is one of the basic requirements for developing countries to attain high level of economic growth. The study thus recommends that as a short-term economic tool, the policymakers may use interest rates to stimulate real growth in GDP in addition to the implementation of appropriate fiscal reforms to stimulate economic activities and support growth.

VL  - 11
IS  - 6
ER  -

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Author Information

Olufemi Ademola

Department of Finance, Babcock University, Ilishan-Remo, Nigeria

Contact Email
Samson Alalade

Department of Finance, Babcock University, Ilishan-Remo, Nigeria
Peter Ogbebor

Department of Finance, Babcock University, Ilishan-Remo, Nigeria
Olalekan Aworinde

Department of Economics, Pan-Atlantic University, Lekki, Nigeria

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APA Style

Ademola, O., Alalade, S., Ogbebor, P., Aworinde, O. (2023). Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model. International Journal of Economics, Finance and Management Sciences, 11(6), 300-310. https://doi.org/10.11648/j.ijefm.20231106.12

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ACS Style

Ademola, O.; Alalade, S.; Ogbebor, P.; Aworinde, O. Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model. Int. J. Econ. Finance Manag. Sci. 2023, 11(6), 300-310. doi: 10.11648/j.ijefm.20231106.12

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AMA Style

Ademola O, Alalade S, Ogbebor P, Aworinde O. Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model. Int J Econ Finance Manag Sci. 2023;11(6):300-310. doi: 10.11648/j.ijefm.20231106.12

Copy | Download

@article{10.11648/j.ijefm.20231106.12,
  author = {Olufemi Ademola and Samson Alalade and Peter Ogbebor and Olalekan Aworinde},
  title = {Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {11},
  number = {6},
  pages = {300-310},
  doi = {10.11648/j.ijefm.20231106.12},
  url = {https://doi.org/10.11648/j.ijefm.20231106.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20231106.12},
  abstract = {Researchers continue to debate the effect of interest rates on economic growth. While some argue that the high interest hurt the economy and high borrowing cost discourages capital investments, others argue that the moderating effect of high interest rate on inflation leads to a positive real growth in the economy. In the bid to test the effect of interest rate on the economic growth, this study examined the nexus between interest rate and real gross domestic product (GDP) growth in Nigeria. To act as counterbalances, the study also introduced money supply and institutional quality as proxies for interest rate. The research is based on ex-post facto research design using a time series data of 68 quarters from 2006Q1 to 2022Q4). The Autoregressive Distributed Lag (ARDL) model was utilized to assess the effect of interest rate on real GDP growth in Nigeria. The study found that interest rate has long-run significant cointegrating relationship with real GDP growth rate (Adj R2 = 0.44; F-stat (4, 63) = 18.55 p < 0.05). The study concluded that interest rate is a significant factor influencing real GDP growth in Nigeria and that maintaining a stable lending rate is one of the basic requirements for developing countries to attain high level of economic growth. The study thus recommends that as a short-term economic tool, the policymakers may use interest rates to stimulate real growth in GDP in addition to the implementation of appropriate fiscal reforms to stimulate economic activities and support growth.
},
 year = {2023}
}

Copy | Download

TY  - JOUR
T1  - Interest Rates and Real Economic Growth in Nigeria: Empirical Investigation from Autoregressive Distributed Lag Model
AU  - Olufemi Ademola
AU  - Samson Alalade
AU  - Peter Ogbebor
AU  - Olalekan Aworinde
Y1  - 2023/11/24
PY  - 2023
N1  - https://doi.org/10.11648/j.ijefm.20231106.12
DO  - 10.11648/j.ijefm.20231106.12
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 300
EP  - 310
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20231106.12
AB  - Researchers continue to debate the effect of interest rates on economic growth. While some argue that the high interest hurt the economy and high borrowing cost discourages capital investments, others argue that the moderating effect of high interest rate on inflation leads to a positive real growth in the economy. In the bid to test the effect of interest rate on the economic growth, this study examined the nexus between interest rate and real gross domestic product (GDP) growth in Nigeria. To act as counterbalances, the study also introduced money supply and institutional quality as proxies for interest rate. The research is based on ex-post facto research design using a time series data of 68 quarters from 2006Q1 to 2022Q4). The Autoregressive Distributed Lag (ARDL) model was utilized to assess the effect of interest rate on real GDP growth in Nigeria. The study found that interest rate has long-run significant cointegrating relationship with real GDP growth rate (Adj R2 = 0.44; F-stat (4, 63) = 18.55 p < 0.05). The study concluded that interest rate is a significant factor influencing real GDP growth in Nigeria and that maintaining a stable lending rate is one of the basic requirements for developing countries to attain high level of economic growth. The study thus recommends that as a short-term economic tool, the policymakers may use interest rates to stimulate real growth in GDP in addition to the implementation of appropriate fiscal reforms to stimulate economic activities and support growth.

VL  - 11
IS  - 6
ER  -

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