Effect of Money Supply on Economic Growth: A Comparative Study of Nigeria and Ghana

Abstract

The effect of money supply in enhancing economic growth in Nigeria and Ghana is investigated in this study. The major objectives of the study are to establish the joint and individual influences of money supply mechanisms on economic growth in Nigeria and Ghana. The study employs data from 2009 to 2018 and uses Ordinary Least Squares regression technique for analysis of the data. The findings reveal that broad money supply (M2) has an insignificant negative influence on RGDP in Nigeria, but in Ghana the impact is significant and positive. Broad money supply (M3) exerts insignificant positive influence on RGDP in Nigeria, but significant negative impact on RGDP in Ghana while credit to private sectors (CPS) has insignificant positive influence on RGDP in both Nigeria and Ghana. The study among others suggests that the Monetary Authorities in the two countries should come up with monetary policy strategies that will help drive the economy better and such policies should consider M2 and CPS more as their contributions are necessary for economic expansion that lead to more output and employment.