Testing the Validity of McKinnon-Shaw Hypothesis: Empirical Evidence from Nigeria
Journal Title: Asian Journal of Economics, Business and Accounting - Year 2017, Vol 2, Issue 2
Abstract
Ronald McKinnon [1] and Edward Shaw [2] explicate the notion of financial repression noting that Financial liberalization is meant to foster economic growth through increase in savings via an increase in real deposit rate and increase in private investment in high priority sectors, but how this policy has contributed to the growth of the Nigerian economy remains a lacuna. It is based on this that the study seeks to test the validity of McKinnon and Shaw Hypothesis Using Empirical evidence in Nigeria. The study employed annual time series data from 1981 to 2014 to provide response to the various determinant of Real Money Demand Balance in Nigeria, the Various determinant of Economic Growth as proxied by Gross Domestic Product in Nigeria with volatility in Financial Ratios and Various Determinant of Nigeria Investment Rate as a result of the capriciousness in Financial Ratios in Nigeria. Autoregressive Distributed lag model was used to analyze three regression models while conducting the Augmented Dickey Fuller, the Johansen Cointegration Test and Granger causal test. Of all financial ratios, It was observed that that interest rate has negligible, trifling or insignificant effect on Real Money balance, Investment Rate and Real Gross domestic Product in Nigeria at 95% level of Significance. Theoretical literature revealed that McKinnon-Shaw hypothesis have been seen to be valid in developed countries but its validity on Real Interest rate based on this findings when tested with empirical evidence is questionable in developing country like Nigeria owing to the undeveloped and unstructured financial system, policy inconsistency and policy mortality hence it is recommended that Nigeria financial system be revamped for a more structured, organized and developed financial system to further enable financial inclusion of all economic agents.
Authors and Affiliations
Audu Peter, Oluwoyo Johnson Temidayo
Keywords
Related Articles
- EP ID EP338556
- DOI 10.9734/AJEBA/2017/30725
- Views 87
- Downloads 0
Impact of International Public Sector Accounting Standards (IPSAS) Adoption on Financial Accountability in Selected Local Governments of Oyo State, Nigeria
The study evaluated the impact of International Public Sector Accounting Standard (IPSAS) on the financial accountability of selected local governments of Oyo State, Nigeria. The impact of IPSAS adoption on corruption re...
Impact of Interest Rate on Portfolio Management in Nigeria
This study carried out an investigation on the impact of interest rate on portfolio management in Nigeria. Specifically the study analyzed the impact of interest rate on both long term and short term portfolio investment...
The Relationship between Customer Satisfaction and Corporate Reputation and Credibility
Service industries, such as banking and finance retailing, are different in many ways to industries that deal with a tangible product. Therefore, service-marketing gurus emphasize process, people, and physical elements t...
Tourists Perceived Festival Attraction, Service Quality, Perceived Value and Loyalty-Case Study Penghu Ocean Firework Festival in Taiwan
The purpose of this study is to understand the relationships between attraction, quality of service, perceived value and loyalty. In this study, a total of 456 effective questionnaires were collected by convenience sampl...
Envirоnmental Repоrting Praсtiсes by Listed Manufaсfuring Firms: The Perspeсtive оf an Emerging Eсоnоmy
The study examined the envirоnmental aссоunting praсtiсes amоng listed manufaсturing соmpanies in Ghana. The study utilised the survey and descriptive research approaches. The annual reports of all manufacturing companie...