Role of Money Market in Economic Development of Nigeria

this report is going to discuss the money market and how interest rates are determined, it will then look at the effects of lowering and raising interest rates and the limitations of these effects. the money market is a section of the financial market where short term loans and financial instruments are traded, for example these could be short term loans between banks with the debt maturing in less than a year.

C/D = 0.1; T/D = 2; ER/D = 0.2, [pic], [pic], MB = 1000. Compute the money multiplier, the money supply, the level of currency and checkable deposits, the level of time deposits and excess reserves, and the level of total reserves and required reserves. Use the model of money supply determination discussed in class. Show your work.

The flow of funds within financial markets is stimulated by the money, bond and mortgage markets. A money market is the trading of highly liquid financial instruments with a duration of one year or less and includes the trading of Treasury bills. Furthermore, bonds are long term investments, with a duration greater than 1 year and are issued by corporations and the U.S. government. In addition, the mortgage market creates loans to finance the real estate market. Once mortgages are issued on a property, banking institutions securitize the mortgages and sell them on the secondary market (CSU Global, 2016). Due to the scale of these three markets they have an extensive impact on the monetary supply and economy.

In every country of the world, exchange rate level is the paramount target of economic policy targeting. In other words, exchange rate policy should be geared towards the attainment of long-term equilibrium rate, so as to achieve certain macro-economic objectives e.g. balance of payments equilibrium, through proper management of the Nigerian exchange rate policy. The country started operating the floating exchange rate system in 1986 after the introduction of SAP. It was expected that the country experience development but the reverse was the case because the country suffered consistent hopeless development situation as her naira depreciates often against other foreign currencies, especially the dollars which was universally accepted as the global medium of exchange. Before the floating system was introduced, $1=NO.89 but after that in 1966 we have $1=N22.05 and even today we have $1=N150.7 .This is quite disheartening, regardless of the effort of the government of Nigeria through the activities of the regulatory body such as the establishment of second tier foreign exchange market (SFEM) in 1986 and interbank foreign exchange market (IFEM) in 1989 and currently the foreign exchange market (AFEM) in 1995.

In the research, data was extracted from FRED which is the database of the St Louis Federal Reserve Bank and Bloomberg. Ordinary least squares (OLS) analysis was used in order to perform the regressions needed to calculate the results. The data was taken exclusively on a domestic level although quantitative easing was implemented abroad as well by the Bank of Japan in 1999.The data was chosen solely from the United States due to easier access to the data and the focus of the research to analyze United States economic affairs.

Anything else (besiders income—such as population or taste) that affects consumption is assumed to enter through autonomous consumption—this shirts the consumption function.

Niger, home of the free flowing Niger River is a Sub-Saharan country. Sadly it is an extremely poor country. With part of the country desert and less than 3% open for crop use. The present economic situation is bleak at best. Yet, the vibrant tradition and history of this country live today in its tribes and its people even through all of its adversities. From severe droughts to military coups to a dysfunctional government to the culture has stayed strong.

PART 1.    Multiple Choice. 30 MARKS (2 marks each). Choose the one alternative that best completes the statement or  answers the question by clearly circling the correct letter option.    ___________________________________       1)  The primary difference between the ʺpayoffʺ and the ʺpurchase and assumptionʺ methods of       handling failed banks

1. What is the typical relationship between interest rates on three-month Treasury bills, long-term treasury bonds, and Baa corporate bonds?

Interest rate is considered as one of the main parameters to control the economic conditions of any country. Interest rate is the key variable for time value of money, which causes a greater shift in money markets and capital markets. This study is basically carried out for the capital market or stock market.

3. Do commercial banks get assistance from central bank of Nigeria when curbing credit risk?

Furthermore, the functions and operations of Bank of England and high street banks are different. By implementing the Sterling Monetary Framework, the system contributes to smoothing market rate and manages to meet the inflation target given by the Government (Bank of England, 2015). As the monopoly note issuer, the Bank provides Sterling of which the public believes its value and consequently it alleviates both shortage and fear of shortage in the market (Siklos et al, 2010). Another function regards to monetary stability is the role of “lender of last resort”, which means it can provide Emergency Liquidity Assistance to the financial institutions at stake. In addition, the Bank operates the nation’s Real Time Gross Settlement system to provide ultimate settlements for commercial banks who holds reserve accounts in the Bank of England (Manning, 2014). As to the functions of retail banks, they provide intermediation and transaction services to both individuals and companies (Greenspan, 1989). The most common ones are receiving deposit and providing loans and advances in different forms, which leads to its key function in the financial market, providing liquidity through creation of credits (Krohn, 2015). There are other derivative functions including collecting and clearing cheques, providing cash management, foreign currency risk solutions, acting as trustee or correspondent etc. All these are essential to the economic operation.

In Nigeria, the return to democratic rule in 1999 led to a myriad of programmes and strategies that were aimed at refocusing the face of the economy so as to resolve the difficulties which years of military rule had placed on it. This reform was, conceptualized principally in the form of a medium term development strategy called the National Economic

In order to ensure the economy delivers on its potentials, the country experimented with two development philosophies-a private sector-led growth in which the private sector served as the “engine house” of the economy and a public sector – driven growth in which the government assumed the “commanding heights” of the economy. The initial low level of private sector development, however, led to public sector dominance of the economy, encouraged by growth in the oil sector (UNDP, 2009).

Money is one of the greatest inventions of a human thought. Perhaps, the whole structure of today’s economy is