Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modeling

The study set out to test the McKinnon-Shaw proposition that financial liberalization will significantly increase savings mobilization. The results partly supported the financial liberalization proposition. Variables that capture the effects of currency substitution such as the interest rate differe...

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Main Authors: M Aziakpono, S B-Obasa
Format: Article
Language:English
Published: AOSIS 2004-04-01
Series:South African Journal of Economic and Management Sciences
Online Access:https://sajems.org/index.php/sajems/article/view/1381
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spelling doaj-69f1cb66c8644d1aa783b71885e1b7e72020-11-25T01:13:00ZengAOSISSouth African Journal of Economic and Management Sciences1015-88122222-34362004-04-017231634010.4102/sajems.v7i2.1381433Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modelingM Aziakpono0S B-ObasaUniversity of StellenboschThe study set out to test the McKinnon-Shaw proposition that financial liberalization will significantly increase savings mobilization. The results partly supported the financial liberalization proposition. Variables that capture the effects of currency substitution such as the interest rate differential, a proxy for underground economy, the inflation differential (as a measure of macroeconomic instability) and a dummy for political instability were significant in their adverse impacts on the saving mobilization process in Nigeria. We, therefore, advocate for an active monetary policy that will help manage the delicate balance between domestic and foreign interest rates. This should be combined with macroeconomic policies that create a stable economic environment along with appropriate financial and exchange rate policies, in order to discourage economic agents from preferring foreign denominated assets to those held in the domestic currency.https://sajems.org/index.php/sajems/article/view/1381
collection DOAJ
language English
format Article
sources DOAJ
author M Aziakpono
S B-Obasa
spellingShingle M Aziakpono
S B-Obasa
Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modeling
South African Journal of Economic and Management Sciences
author_facet M Aziakpono
S B-Obasa
author_sort M Aziakpono
title Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modeling
title_short Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modeling
title_full Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modeling
title_fullStr Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modeling
title_full_unstemmed Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modeling
title_sort financial liberalization, currency substitution and savings in nigeria: evidence from cointegration and error correction modeling
publisher AOSIS
series South African Journal of Economic and Management Sciences
issn 1015-8812
2222-3436
publishDate 2004-04-01
description The study set out to test the McKinnon-Shaw proposition that financial liberalization will significantly increase savings mobilization. The results partly supported the financial liberalization proposition. Variables that capture the effects of currency substitution such as the interest rate differential, a proxy for underground economy, the inflation differential (as a measure of macroeconomic instability) and a dummy for political instability were significant in their adverse impacts on the saving mobilization process in Nigeria. We, therefore, advocate for an active monetary policy that will help manage the delicate balance between domestic and foreign interest rates. This should be combined with macroeconomic policies that create a stable economic environment along with appropriate financial and exchange rate policies, in order to discourage economic agents from preferring foreign denominated assets to those held in the domestic currency.
url https://sajems.org/index.php/sajems/article/view/1381
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AT sbobasa financialliberalizationcurrencysubstitutionandsavingsinnigeriaevidencefromcointegrationanderrorcorrectionmodeling
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