Abstract

The paper aims to answer the question on whether the output gap is influenced by the transmission of monetary policy shocks. For Nigeria, using database of time series data from the Central Bank of Nigeria and the National Bureau of Statistics (2002M01 to 2018M12), we estimate time series models using Generalized Method of Moments, Autoregressive Distributed Lag and Differenced Ordinary Least Squares estimation techniques. We analyze the empirical results of the 3 considered approaches and the impact of CBN development finance and the naira exchange rate shocks on output gap are found significant. The results, however, show that inflation and interest rate is insignificant in the determination of the output gap. We also identify exchange rate as a significant and relevant transmission channel for monetary policy.

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