Abstract

This study investigated the response of the different monetary policy channels to several macroeconomic variables in Nigeria and established the dominant channel on output from the period of 1986 to 2017 using quarterly data. Variables such as private sector credit, inflation rate, monetary policy rate, exchange rate, all share index and real output were used to carry out this investigation. The study adopted the structural break and structural VAR methods in achieving the objectives and found a significant standard deviation real effect on each monetary policy channel in the short term, while it also found that innovations arising from a channel itself caused the greatest shock on its future values. The findings further demonstrated that each monetary policy channel had a weak influence on output, with interest rate channel being the dominant channel of monetary policy on output. Finally, the paper suggested that the monetary authority should keep using interest rate as the major policy anchor through which monetary impulses are transmitted into the economy.

Key words: Monetary transmission mechanism, interest rate channel, exchange rate channel, credit channel, expectations channel, asset price channel, output, structural vector autoregressive (SVAR).