Open AccessIMPACT OF MACROECONOMIC BEHAVIOUR ON DEPOSIT MONEY BANK LIQUIDITY IN NIGERIA
Author(s) -
Joseph Akeerebari Topbie,
Fiberesima Ibiwari,
Godgift Anyamaobi Nwankwo
Publication year - 2022
Publication title -
european journal of economic and financial research
Language(s) - English
Resource type - Journals
ISSN - 2501-9430
DOI - 10.46827/ejefr.v6i1.1209
Subject(s) - market liquidity , distributed lag , money supply , monetary economics , economics , short run , broad money , monetary policy , exchange rate , interest rate , liquidity crisis , accounting liquidity , econometrics
According to Keynes (1936), money is the most liquid asset. Liquidity is an attribute to an asset. The more quickly an asset is converted into money the more liquid it is said to be. Purpose: this study was carried out to determine the long-run and short-run impact of macroeconomic behaviour as measured by money supply, exchange rate, real interest rate, and credit to the private sector on deposit money bank liquidity in Nigeria as measured by liquidity ratio; using annual time-series data ranging from 1990 to 2020. Methodology/Technique: the purpose of this study was achieved by the application of Autoregressive Distributed Lag Technique (ARDL) together with Augmented Dickey-Fuller and Phillip-Peron Tests. Findings: it was revealed that the liquidity ratio converged with 3.17% to long-run equilibrium after a shock to explanatory variables. It further displayed that the current level of money supply and real interest rate had a negative but significant impact on liquidity ratio, whereas, one-year lag and two-year lag of money supply, real interest rate, and exchange rat positively impacted liquidity ratio in both long-run and short-run. Conversely, it was revealed that one-year lag, two-year lag, and three-year lag of credit to the private sector had a negative and insignificant impact on liquidity ratio in the long-run, while it negatively and significantly impacted liquidity ratio in the short-run. Conclusion/Policy Recommendations: As a result of the findings, the study recommended that government policies that will enforce sustainable and efficient liquidity ratio be made feasible in the banking sector. JEL: E10; E20; E40 Article visualizations: