Empirical Modelling of the Impact of Financial Innovation on the Demand for Money in Nigeria

Matthew, Oluwatoyin and Fasina, Fagbeminiyi and Olowe, O. and Adegboye, F.B. (2010) Empirical Modelling of the Impact of Financial Innovation on the Demand for Money in Nigeria. International Research Journal of Finance and Economics. ISSN 1450-2887

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Abstract

Financial innovation refers both to technological advances which facilitate access to information, trading and means of payment. The demand for money is very crucial in the conduct and determination of the effectiveness of monetary policy. This study attempts to analyse whether financial innovations that occurred in Nigeria after the Structural Adjustment Programme of 1986 has affected the demand for money in Nigeria using the Engle and Granger Two-Step Cointegration technique. Though the study revealed that demand for money conforms to the theory that income is positively related to the demand for cash balances and interest rate has an inverse relationship with the demand for real cash balances, it was also di scovered that the financial innovations introduced into the financial system have not significantly affected the demand for money in Nigeria. Based on the results obtained, a policy of attracting more patticipants (non-government) and private sector funds to the money market is necessary as this will deepen the market and make the market more dynamic and amenable to monetary policy. Therefore, the study concludes that financial innovation has had no significant impact on the demand for money in Nigeria and the SAP era financial liberalization policies have had no indirect impact on the demand for money as well.

Item Type:	Article
Uncontrolled Keywords:	Money Demand; Deposit; Narrow Money; Interest Rate; M; DD; Nigeria
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
Divisions:	Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User:	Mrs Patricia Nwokealisi
Date Deposited:	13 May 2014 08:57
Last Modified:	13 May 2014 08:57
URI:	http://eprints.covenantuniversity.edu.ng/id/eprint/2604

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