Abstract:

This paper investigates the relationship between money market and economic growth using annual time series data for the period 1981-2018 based on Fully Modified Ordinary Least Squares (FMOLS) and Granger causality analysis. Other econometric techniques applied include ADF unit root test, Pearson correlation, impulse response and variance decomposition techniques. Empirical findings reveal the existence of a positive, strong and significant correlation between money market and economic growth. The study also found that money market has positive and significant impact on economic growth in Nigeria. Causality flows from money market to economic growth but not vice versa. The study concludes that money market constitutes a veritable vehicle for achieving economic growth in Nigeria. It is imperative for Nigerian government to strengthen the money market by encouraging participants in the market through its various policies like tax incentives, extension of interest-free short term investment loans to investing public.