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Spillover Effect of Interest Rate Volatility on Banking Sector Development in Nigeria: Dynamic ARDL Bound Test Approach

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Global Issues in Banking and Finance

Part of the book series: Springer Proceedings in Business and Economics ((SPBE))

Abstract

This study investigates the dynamic spillover effect in the United States (US) interest rate volatility on the Nigerian banking sector development. The study adopts the bounds test approach in the context of the dynamic autoregressive distributed lag model (ARDL) and the modified Granger causality test. Empirical results support the dynamic impact in the spillover effect of US interest rate volatility on the banking sector development in Nigeria—over the short and long run time horizons. The research reveals that the spillover in the US interest rate volatility affects the development of the Nigerian banking sector through numerous channels—most significantly—via the real interest rate channel. Thus, the empirical results in the current research confirm the spillover impacts of US interest rate volatility consistent with other empirical studies—and is of interest to central bank monetary policy decisions.

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Notes

  1. 1.

    Following the approach in Pesaran et al. (2001), the results in Table 2 for the bounds level relationships indicates whether to include or not to allow trend restrictions.

  2. 2.

    \(D_{t}\) and \(B_{t}\) are estimating in their natural logarithm.

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Author information

Authors and Affiliations

  1. Almaty Management University, Almaty, Kazakhstan

    Alimshan Faizulayev

  2. Institute of Social Sciences, University of Mediterranean Karpasia, Lefkoşa, North Cyprus, Turkey

    Isah Wada

Authors
  1. Alimshan Faizulayev
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  2. Isah Wada
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Corresponding author

Correspondence to Alimshan Faizulayev .

Editor information

Editors and Affiliations

  1. Eastern Mediterranean University, Famagusta, Turkey

    Nesrin Ozatac

  2. Eastern Mediterranean University, Famagusta, Turkey

    Korhan K. Gokmenoglu

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Faizulayev, A., Wada, I. (2019). Spillover Effect of Interest Rate Volatility on Banking Sector Development in Nigeria: Dynamic ARDL Bound Test Approach. In: Ozatac, N., Gokmenoglu, K. (eds) Global Issues in Banking and Finance. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-30387-7_8

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