Unconventional Monetary Policy Tools and Macroeconomic Stability during Economic Shocks in Nigeria
Keywords:
monetary policy tools, macroeconomic stability, economic shock, inflation, NigeriaAbstract
This study aims to evaluate the unconventional monetary policy tools and macroeconomic stability during economic shocks in Nigeria. The study was guided by three research questions. The research design employed was ex post facto research design. Secondary data was used which was collected from International Monetary Fund (IMF), National Bureau of Statistics (NBS), Economic Data GDP and World bank websites. Multiple regression analysis was employed by the study using E-view software. The result indicates that the quantitative easing has a positive coefficient of 0.856 which means that as the unconventional monetary policy interventions are on the rise, the economic growth rate is likely to go up. The result also shows that the positive coefficient of quantitative easing is 3.941 that implies, as QE increases, there is a tremendous increase in the rate of inflation. Also, the finding reveals that the coefficient of quantitative easing is negative at -0.654 implying that the higher the level of unconventional interventions by the monetary policy, the lower the level of unemployment. In conclusion the results indicated that quantitative easing has a positive impact on the economic growth and important in decreasing unemployment but also plays a role in increasing inflation. As such, liquidity injections should be administered carefully by the policymakers to strike a balance between economic stimulation and price stability and sustainable macroeconomic performance. The study therefore recommends that the Central Bank of Nigeria needs to be keen to manage how it adopts the quantitative easing to avoid the situation of injecting liquidity in the economy and causing too much inflationary pressure in the economy.
References
Bank of England. (2026). Agenda for Research, 2025-2028: Global Drivers and Cross-border Spillovers. Bank of England Publications.
Bernanke, B. S. (2020). The new tools of monetary policy. American Economic Review, 110(4), 943–983.
Bernanke, B. S. (2020). The new tools of monetary policy. American Economic Review, 110(4), 943–983.
Blanchard, O. (2021). Macroeconomics (8th ed.). Pearson Education.
Borio, C. (2022). The limits of monetary policy in stabilizing the economy. Bank for International Settlements Quarterly Review, 54(2), 15–29.
Campbell, J. R., Evans, C. L., Fisher, J. D., & Justiniano, A. (2021). Macroeconomic effects of forward guidance. Annual Review of Economics, 13, 55–77.
Chen, Q., Filardo, A., He, D., & Zhu, F. (2022). Financial crisis, unconventional monetary policy and international spillovers. Journal of International Money and Finance, 120, 102497.
Eggertsson, G., Juelsrud, R., Summers, L., & Wold, E. (2022). Negative nominal interest rates and the bank lending channel. American Economic Review, 112(9), 2785–2823.
Gagnon, J. (2023). Quantitative easing and financial stability during crises. Journal of Economic Perspectives, 37(1), 45–66.
Gagnon, J., Raskin, M., Remache, J., & Sack, B. (2021). Large-scale asset purchases by the Federal Reserve: Did they work? International Journal of Central Banking, 17(3), 1–34.
Gambacorta, L., Hofmann, B., & Peersman, G. (2021). The effectiveness of unconventional monetary policy at the zero lower bound. Journal of Money, Credit and Banking, 53(4), 615–653.
Holzmann, R. (2024). Unconventional monetary policy under review: Past, present and future challenges. OeNB Occasional Paper No. 8.
International Monetary Fund (IMF). (2023). Global financial stability report. Washington, DC: IMF.
International Monetary Fund (IMF). (2025). Macroeconomic and Fiscal Consequences of Quantitative Easing. IMF Staff Discussion Note, WP/25/112.
Joyce, M., Miles, D., Scott, A., & Vayanos, D. (2021). Quantitative easing and unconventional monetary policy. Economic Journal, 131(634), 217–245.
Krishnamurthy, A., & Vissing-Jorgensen, A. (2021). The effects of quantitative easing on interest rates. Brookings Papers on Economic Activity, 2021(2), 215–287.
Krugman, P. (2021). Liquidity traps and monetary policy. Brookings Papers on Economic Activity, 2021(1), 221–260.
Lane, P. R. (2024). The portfolio rebalancing channel and the transmission of UMP. European Central Bank Policy Brief.
Luetticke, R. (2024). Unconventional Monetary Policy Shocks and Their Distributional Implications. CEPR Discussion Paper No. 19163.
Mishkin, F. S. (2022). The economics of money, banking and financial markets (13th ed.). Pearson Education.
Romer, D. (2023). Advanced macroeconomics (6th ed.). McGraw-Hill.
Schularick, M., & Taylor, A. (2022). Credit booms gone bust: Monetary policy and financial cycles. American Economic Review, 112(5), 1453–1493.
Spisso, M., et al. (2024). The Side Effects of Unconventional Monetary Policy: A Survey of Resource Misallocation. Journal of Economic Perspectives.
Woodford, M. (2021). Monetary policy in the information economy. Journal of Economic Perspectives, 35(4), 3–28.
