An Assessment of the Effectiveness of Central Bank Sterilization on Capital Inflows in Nigeria
| Autor: | Tijjani M. Jume |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
Assets price
capital flows 010308 nuclear & particles physics 050204 development studies 05 social sciences sterilization Financial system General Medicine Sterilization (economics) Impossible trinity 01 natural sciences Central bank Capital (economics) 0502 economics and business 0103 physical sciences ddc:330 Economics E58 Capital flows E52 impossible trinity |
| Zdroj: | Central Bank of Nigeria Journal of Applied Statistics. :201-230 |
| ISSN: | 2476-8472 2141-9272 |
| DOI: | 10.33429/cjas.11220.8/8 |
| Popis: | This paper assesses the monetary policy response of the Central Bank of Nigeria (CBN) to increases in capital inflows into Nigeria using monthly time series data from January 2009 to December 2017. It presents an econometric assessment of the degree to which the CBN sterilizes net foreign assets (NFA) in response to the capital flows, using Autoregressive Distributed Lag (ARDL) bounds testing approach. The long run sterilization coefficient obtained suggests that the CBN successfully offset 95per cent of capital inflows in the period of analysis. Against the background of rising financial instability in Nigeria, the study illustrates how sterilization has not adequately tackled the major risks of capital inflows which resulted in asset price bubbles and bursts, equity capital inflows reversal, banking crisis, and currency depreciation which contributed, partly, to the economic recession in 2016. The paper argues that effective policy response to capital inflows must adequately address the major downside risks of capital inflows in the short and medium terms through some clearly defined capital flows management and macro-prudential measures. |
| Databáze: | OpenAIRE |
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