Dynamic Spill-Overs and Frequency Connectedness among Monetary Policy, Investment and Sectoral Output in Nigeria: Evidence from a Time-Varying Parameter VAR Model

This study investigates the dynamic spillovers and frequency connectedness among monetary policy, investment and sectoral output in Nigeria over the period 1990–2025. Employing the Frequency Time-Varying Parameter Vector Autoregressive (Frequency TVP-VAR) framework, the study examines the magnitude, direction and persistence of macroeconomic shock transmission across eight variables: GDP growth, foreign direct investment, gross fixed capital formation, money supply, interest rates, agricultural output, manufacturing output and crude oil production growth. The findings reveal substantial macroeconomic interdependence, with Total Connectedness Indices of 39.74% and 39.75% in the time and frequency domains, respectively. GDP growth, interest rates, manufacturing output and money supply emerge as net transmitters of shocks, while crude oil production growth, gross fixed capital formation, agricultural output and foreign direct investment are net receivers. Frequency decomposition indicates that medium-term fluctuations (4–10 years) account for the largest share of total connectedness (41.9%), followed by short-term (2–4 years; 36.0%) and long-term (above 10 years; 22.1%) fluctuations. Interest rates and money supply dominate short-term transmission, manufacturing output and GDP growth are prominent medium-term transmitters, while GDP growth and agricultural output lead long-term transmission. Pairwise and network analyses further reveal asymmetric and heterogeneous inter-sectoral spillovers. The study concludes that macroeconomic connectedness in Nigeria is time-varying, frequency-dependent and sectorally differentiated. It recommends coordinated monetary, investment and sectoral policies that integrate short-term stabilisation, medium-term productive expansion and long-term economic resilience

Frequency TVP-VAR; Dynamic spillovers; Monetary policy; Investment; Sectoral output; Nigeria.

1. Adelowo, A., & Saibu, O. (2025). Sectoral output growth responses to macroeconomic policy shocks: Evidence from Nigeria. Botswana Journal of Economics, 17(2), 14–26. [Google Scholar] [Crossref]

2. https://doi.org/10.5897/BOJE2025.0021 [Google Scholar] [Crossref]

3. Antonakakis, N., Chatziantoniou, I., & Gabauer, D. (2020). Refined measures of dynamic connectedness based on time-varying parameter vector autoregressions. Journal of Risk and Financial Management, 13(4), Article 84. https://doi.org/10.3390/jrfm13040084 [Google Scholar] [Crossref]

4. Baruník, J., & Křehlík, T. (2018). Measuring the frequency dynamics of financial connectedness and systemic risk. Journal of Financial Econometrics, 16(2), 271–296. [Google Scholar] [Crossref]

5. https://doi.org/10.1093/jjfinec/nby001 [Google Scholar] [Crossref]

6. Bernanke, B. S., & Gertler, M. (1995). Inside the black box: The credit channel of monetary policy transmission. Journal of Economic Perspectives, 9(4), 27–48. https://doi.org/10.1257/jep.9.4.27 [Google Scholar] [Crossref]

7. Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45(1), 115–135. https://doi.org/10.1016/S0022-1996(97)00033-0 [Google Scholar] [Crossref]

8. Central Bank of Nigeria. (2025). Monetary policy decisions. [Google Scholar] [Crossref]

9. https://www.cbn.gov.ng/MonetaryPolicy/decisions.html [Google Scholar] [Crossref]

10. Diebold, F. X., & Yilmaz, K. (2009). Measuring financial asset return and volatility spillovers, with application to global equity markets. The Economic Journal, 119(534), 158–171. [Google Scholar] [Crossref]

11. https://doi.org/10.1111/j.1468-0297.2008.02208.x [Google Scholar] [Crossref]

12. Diebold, F. X., & Yilmaz, K. (2012). Better to give than to receive: Predictive directional measurement of volatility spillovers. International Journal of Forecasting, 28(1), 57–66. [Google Scholar] [Crossref]

13. https://doi.org/10.1016/j.ijforecast.2011.02.006 [Google Scholar] [Crossref]

14. Ezeaku, H. C., Ibe, I. G., Ugwuanyi, U. B., Modebe, N. J., & Agbaeze, E. K. (2018). Monetary policy transmission and industrial sector growth: Empirical evidence from Nigeria. SAGE Open, 8(2), 1–12. https://doi.org/10.1177/2158244018769369 [Google Scholar] [Crossref]

15. Goshit, G. G., Jelilov, G., Iorember, P. T., Celik, B., & Davd-Wayas, O. M. (2022). Asymmetric effects of monetary policy shocks on output growth in Nigeria: Evidence from nonlinear ARDL and Hatemi-J causality tests. Journal of Public Affairs, 22, Article e2449. https://doi.org/10.1002/pa.2449 [Google Scholar] [Crossref]

16. International Monetary Fund. (2025). Nigeria: 2025 Article IV consultation—Press release; staff report; and statement by the executive director for Nigeria (IMF Country Report No. 25/157). https://doi.org/10.5089/9798229015127.002 [Google Scholar] [Crossref]

17. Mishkin, F. S. (1996). The channels of monetary transmission: Lessons for monetary policy (NBER Working Paper No. 5464). National Bureau of Economic Research. https://doi.org/10.3386/w5464 [Google Scholar] [Crossref]

18. Nwosa, P. I., & Saibu, M. O. (2012). The monetary transmission mechanism in Nigeria: A sectoral output analysis. International Journal of Economics and Finance, 4(1), 204–212. [Google Scholar] [Crossref]

19. https://doi.org/10.5539/ijef.v4n1p204 [Google Scholar] [Crossref]

20. Ogunjinmi, O. O., & Adekunle, E. A. (2025). Asymmetric effects of monetary policy on agricultural performance in Nigeria. African Journal of Economic Review, 13(1), 95–111. [Google Scholar] [Crossref]

21. https://www.ajol.info/index.php/ajer/article/view/290599 [Google Scholar] [Crossref]

22. Pesaran, M. H., & Shin, Y. (1998). Generalized impulse response analysis in linear multivariate models. Economics Letters, 58(1), 17–29. https://doi.org/10.1016/S0165-1765(97)00214-0 [Google Scholar] [Crossref]

23. Primiceri, G. E. (2005). Time varying structural vector autoregressions and monetary policy. The Review of Economic Studies, 72(3), 821–852. https://doi.org/10.1111/j.1467-937X.2005.00353.x [Google Scholar] [Crossref]

24. Saibu, M. O., & Nwosa, P. I. (2011). Effects of monetary policy on sectoral output growth in Nigeria (1986 to 2008). Journal of Economics and Behavioral Studies, 2(6), 245–254. [Google Scholar] [Crossref]

25. Saliu, M. O. (2024). Monetary policy transmission, labour force participation and real sector performance in Nigeria. International Journal of Research and Innovation in Social Science, 8(7), 2970–2978. https://doi.org/10.47772/IJRISS.2024.807231 [Google Scholar] [Crossref]

26. Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65–94. https://doi.org/10.2307/1884513 [Google Scholar] [Crossref]

27. World Bank. (2025). From policy to people: Bringing the reform gains home (Nigeria Development Update). [Google Scholar] [Crossref]

28. https://www.worldbank.org/en/news/press-release/2025/10/08/positive-economic-momentum-in-nigeria-now-time-to-bring-home-the-gains [Google Scholar] [Crossref]

• Employee Suggestion Schemes as a Driver of Innovation and Value Creation in Organizations
• Profitability, Growth and Market Valuation of Leading Pharmaceutical Companies in India: A Comparative Financial Analysis
• Problems and Prospects of Sale Employees of Non-Banking Financial Companies
• Core Temperature Estimation and Thermal Management of Lithium-Ion Batteries Using a Nonlinear Adaptive Extended Kalman Filter
• A Conceptual Analysis of How Sustainable Public Procurement Practices Influence Value for Money in Developing Economies