An Empirical Analysis of Real Deposits in Nigeria

An Empirical Analysis of Real Deposits in Nigeria

Shuaibu, Mohammed

Abstract: The difference between estimated parameters of money supply and currency-deposit ratio is used to examine the behaviour of real deposits in Nigeria between 1960 and 2012. This is done using unrestricted error correction modelling within the bounds testing approach to cointegration proposed by Pesaran et al. (2001). Our findings revealed that inflation, real income and interest rates remain major factors influencing real deposit dynamics in Nigeria. Interestingly, financial innovation measured by the ratio of credit to the private sector and GDP was found to increase real deposits by 0.014% while the shadow economy accounted for the 0.96% fall in real deposits recorded. While interest rate and inflation remain quantitatively important in explaining long-run real deposit behaviour in Nigeria, our finding further underscores the need for monetary authorities to mainstream the informal sector into the financial system given the significant negative influence the shadow economy exerted on real deposit

Article
PeerReviewed

International Burch University

2015

2924