INFLUENCE OF MONETARY POLICY ON INTERNATIONAL TRADE : COINTEGRATION AND ERROR CORRECTION MECHANISM

Abstract

This study examines the influence of monetary policy on international trade in Nigeria. Sources of data are Central Bank of Nigeria (CBN) and World Development Indicator (WDI) 2021. The study uses Cointegration and Error correction mechanism to analyse the data. The cointegration result shows that there is a longrun relationship between international trade and monetary policy in Nigeria. The Error correction mechanism shows that all the variables are statistically significant at 5% level except for interest rate. Based on the coefficient of determination (R2) result, the study concludes that there are other non-monetary instruments that influence international trade not captured by the study. Fiscal policy should supplement the monetary agency through the CBN should regulate the monetary policy towards increasing the country’s productivity as this will lead to increase in export and also create employment.