Analysing the Nexus between the Financial Sector and Economic Growth in Nigeria: A Comparative Investigation using, BVAR, Linear Regression (OLS), and PPML Models

Kingdom Nwuju *

Department of Mathematics, Rivers State University, Port Harcourt, Rivers State, Nigeria.

Ifeoma Better Lekara-Bayo

Department of Mathematics, Rivers State University, Port Harcourt, Rivers State, Nigeria.

Sabinus Nnamdi Nwanneako

Department of Mathematics, Rivers State University, Port Harcourt, Rivers State, Nigeria.

Yvonne Asikiye Da-Wariboko

Department of Mathematics, Rivers State University, Port Harcourt, Rivers State, Nigeria.

*Author to whom correspondence should be addressed.


Abstract

Aims: This study aims to analyze the complex relationship between the financial sector and economic growth in Nigeria. The study aims to provide comprehensive insights into this nexus by employing a comparative investigation using three distinct models: Linear Regression, Poisson Pseudo Maximum Likelihood (PPML), and Bayesian Vector Autoregression (BVAR).

Methodology: The study then applied three different models, with a specific focus on the BVAR(2) model, supported by various diagnostic tests and stability assessments. The inclusion of Linear regression analysis and Poisson Pseudo Maximum Likelihood Estimator (PPML) enhances the depth of the study, providing nuanced insights into the impact of specific financial sector variables on economic growth.

Results: The BVAR (2) model emerges as the optimal choice, demonstrating its reliability in capturing dynamic interactions and offering a powerful tool for policymakers. Specific results, such as the significant negative impact of D(CPS) in the regression analysis and the high R-squared in PPML, provide actionable insights into areas requiring policy interventions and underscore the substantial contribution of the financial sector to economic growth.

Conclusion: The comparative assessment of model performances, favoring the BVAR model, guides future research and policy considerations, providing a reliable framework for further investigations. The study's insights are positioned as valuable for policymakers seeking to enhance economic growth through strategic interventions in the financial sector. Overall, the abstract succinctly encapsulates the aims, methodology, results, and concluding implications of the study on the nexus between the financial sector and economic growth in Nigeria.

Keywords: Time series, demand deposit, credit to private sector, money supply, GDP, BVAR, regression, OLS, PPML


How to Cite

Nwuju, K., Lekara-Bayo, I. B., Nwanneako , S. N., & Da-Wariboko, Y. A. (2024). Analysing the Nexus between the Financial Sector and Economic Growth in Nigeria: A Comparative Investigation using, BVAR, Linear Regression (OLS), and PPML Models. Asian Journal of Probability and Statistics, 26(3), 13–27. https://doi.org/10.9734/ajpas/2024/v26i3597

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