Volume 11, Issue 2, November 2014, Pages 295–303
Olalekan Oyedele1
1 Centre for Continuing Education, Federal University of Technology, Akure, Ondo State, Nigeria
Original language: English
Copyright © 2014 ISSR Journals. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
The paper examined the relationship between term structure of interest rate and economic activity and also investigated the relationship between term structure of interest rate and inflation rate in Nigeria. This was with a view of providing additional evidence on the predictive power of term structure of interest rate in Nigeria. The study employed quarterly time series data, from 1986-2008. The period was chosen based on the availability of one of the data used(14 years government bond). The study employed Dynamic Ordinary Lest Square(DOLS) techniques in the analysis. The diagnostics test conducted showed that the results obtain is valid and reliable. The estimated result shows that term structure of interest rate being the difference between interest rates of different maturities had positive and long run relationship with economic activity and inflation rate in Nigeria. The study concluded that the positive and significant of term structure of interest rate indicated that, term structure of interest rate in Nigeria does contain information about future inflation rate and economic activities. The study suggested that monetary authority should be consistent in interest rate policy formulation and Government should also bolster its activity in the Government securities market, as all these will improve the predictive ability of term structure of interest rate about future activities in Nigeria.
Author Keywords: Interest rate, Economic Activity, Growth, Monetary Indicator.
Olalekan Oyedele1
1 Centre for Continuing Education, Federal University of Technology, Akure, Ondo State, Nigeria
Original language: English
Copyright © 2014 ISSR Journals. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abstract
The paper examined the relationship between term structure of interest rate and economic activity and also investigated the relationship between term structure of interest rate and inflation rate in Nigeria. This was with a view of providing additional evidence on the predictive power of term structure of interest rate in Nigeria. The study employed quarterly time series data, from 1986-2008. The period was chosen based on the availability of one of the data used(14 years government bond). The study employed Dynamic Ordinary Lest Square(DOLS) techniques in the analysis. The diagnostics test conducted showed that the results obtain is valid and reliable. The estimated result shows that term structure of interest rate being the difference between interest rates of different maturities had positive and long run relationship with economic activity and inflation rate in Nigeria. The study concluded that the positive and significant of term structure of interest rate indicated that, term structure of interest rate in Nigeria does contain information about future inflation rate and economic activities. The study suggested that monetary authority should be consistent in interest rate policy formulation and Government should also bolster its activity in the Government securities market, as all these will improve the predictive ability of term structure of interest rate about future activities in Nigeria.
Author Keywords: Interest rate, Economic Activity, Growth, Monetary Indicator.
How to Cite this Article
Olalekan Oyedele, “The Relationship between the Term Structure of Interest Rates and Nigeria Economic Growth and Inflation Rate,” International Journal of Innovation and Scientific Research, vol. 11, no. 2, pp. 295–303, November 2014.
