Academy of Entrepreneurship Journal (Print ISSN: 1087-9595; Online ISSN: 1528-2686)


Foreign portfolio investment and monetary policy: A disaggregated analysis in Nigeria

Author(s): Nurettin Can, Nurlan Atabaev, Yusuf Adamu, Talant Asan Uulu, Sanar Muhyaddin

The study used Toda-Yamamoto causality framework, an augmented vector autoregressive model, to examine the response of foreign portfolio investment to monetary policy decisions in Nigeria. The results indicated no causality running from any of the monetary policy tools to aggregate foreign portfolio investment. However, a unidirectional causality was found running from the total foreign portfolio investment to the policy rate and cash reserve ratio. This suggests that monetary policy is reactive, as developments in the foreign portfolio markets influence it. The results also showed that each key component response to specific monetary policy instruments with varying levels of magnitudes.

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