Economic and Financial Review


Central Bank of Nigeria, Research Department


Central Bank of Nigeria, Income Velocity, Money, Monetary Targeting, Nigeria


In this paper, the authors set out to empirically investigate the determinants of income velocity of money in Nigeria, using quarterly time series from 1985:1 to 2012:4. The paper confirms a positive and statistically significant relationship between the growth of income and the velocity of money, which supports the quantity theory of money. Interest rate also has a positive and significant relationship with the income velocity of money. The financial sector development variable adopted, growth rate of stock market capitalization, has a negative relationship with the income velocity of money. The variance decomposition and impulse response results identified inflation rate as the most significant variable to innovations in the income velocity. The results show that the monetary authority cannot obtain additional leverage by issuing more money without generating high inflationary pressure.





Recommended Citation

Okafor, P.N et al. (2013). Determinants of income velocity of moneyin Nigeria. Economic and Financial Review. 51(1), 29-59



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