Lucky Anthony Osayuki
Department of Economics and Finance , Faculty of Management, Law and Social Sciences, University of Bradford.
Osayukilucky40@gmail.com
Orcid: https://orcid.org/0009-0002-8629-7695
Publication History:
Received: [18th Dec 2025]
Accepted: [21th Dec 2025]
Published: [27th Dec 2025]
How to cite: Osayuki, L. A. (2025). Monetary Transmission Mechanism and Productivity Growth: Evidence from Selected Sub Saharan African Countries. International Journal of Scholarly Resources, ISSN: 1234-5678
Abstract
This study examines the Monetary Transmission Mechanism (MTM) and its impact on productivity growth in selected Sub-Saharan African (SSA) countries over the period 1981 to 2023. Utilizing a panel of 10 countries, we estimate two models agricultural value added and manufacturing value added using Panel ARDL and Dumitrescu-Hurlin panel causality tests. The results reveal slow adjustment to equilibrium in both sectors, with agricultural productivity negatively affected by interest rates in the long run while manufacturing shows a positive response, contradicting conventional economic theory. Domestic credit to the private sector exhibits mixed effects: reducing agricultural output while accelerating manufacturing growth over the long run. Exchange rate depreciation positively impacts agriculture but negatively affects manufacturing in the long run. These findings underscore the porous and ineffective nature of MTM in SSA due to weak institutions, narrow financial markets, and the expanding fintech and shadow banking sectors. The study highlights the urgent need for targeted credit policies, institutional reforms, and financial sector modernization to improve policy transmission and sectoral productivity in SSA.
Keywords: Monetary Transmission Mechanism, Productivity Growth, Panel ARDL, Sub-Saharan Africa, Interest Rate Channel
Preview
Reference
Acemoglu, D. and Robinson, J. (2019) The Narrow Corridor: States, Societies, and the Fate of Liberty. Penguin Press.
Adongo, S.O., John, S.O., Zeph, P. and Muyima, R.N. (2020) Impact of monetary policy on the performance of the agricultural sector in Kenya. International Journal of Research and Innovation in Social Science, 4(7), 562-568.
Adrian, T. and Ashcraft, A.B. (2016) Shadow banking: A review of the literature. Federal Reserve Bank of New York Staff Reports, No. 580.
African Development Bank (2021) African Economic Outlook 2021. Available from https://www.afdb.org/en/documents/african-economic-outlook-2021.
Agya, A. (2023) Financial inclusion and economic growth in Nigeria: Further Evidence from the ARDL Model. NDIC Quarterly, 38(1).
Ali, J. and Sami, A. (2024) FinTech revolutionizing the banking domain. Premier Journal of Business and Management, 12, 15.
Andrew, S. et al. (2019) Monetary policy transmission in East Africa. Journal of African Economies, 28(3), 225-251.
Arora, R. and Jalilian, H. (2020) Financial development, human capital and economic growth: the Indian case. Journal of Banking, Finance and Sustainable Development, 1(1), 69-83.
Auer, R. et al. (2022) Central bank digital currencies: Motives, economic implications and the research frontier. Annual Review of Economics, 14, 697-721.
Ayyagari, M., Beck, T. and Hoseini, M. (2020) Finance, law and poverty: Evidence from India. Journal of Corporate Finance, 60, 101515.
Banda, L.G. (2021) Determinants of Commercial Banks’ Performance in Malawi: An Autoregressive Distributed Lag (ARDL) Approach. SSRN Working Paper.
Barros, L.A. et al. (2020) Endogeneity in panel data regressions: methodological guidance for corporate finance researchers. Revista brasileira de gestão de negócios, 22, 437-461.
Beck, T. and Maimbo, S.M. (2019) Financial Sector Development in Africa. World Bank Publications.
Berg, A. et al. (2019) The monetary transmission mechanism in the tropics: a case study approach. Journal of African Economies, 28(3), 225-251.
Bernanke, B.S. and Gertler, M. (1995) Inside the black box: the credit channel of monetary policy transmission. Journal of Economic Perspectives, 9(4), 27-48.
Besley, T. and Ghatak, M. (2017) Property rights and economic development. In Handbook of Economic Growth (Vol. 2, pp. 4525-4595). Elsevier.
Daoui, M. (2023) Monetary Policy and Economic Growth in Developing Countries: A Literature Review. arXiv preprint arXiv:2303.03162.
Deininger, K. and Jin, S. (2006) Tenure security and land-related investment: Evidence from Ethiopia. European Economic Review, 50(5), 1245-1277.
Effiong, E.L., Esu, G.E. and Chuku, C. (2020) Financial development and monetary policy effectiveness in Africa. Journal of Social and Economic Development, 22(1), 160-181.
Famoroti, O.J. and Adeleke, O. (2022) Impact of monetary policy transmission mechanism in west african countries. Studia Universitatis Vasile Goldiş Arad – Seria Ştiinţe Economice, 32(1), 20-42.
Friedman, M. (1968) The role of monetary policy. American Economic Review, 58(1), 1-17.
Gill, H., Kanbur, S.M. and Prasad, E. (2009) Monetary Policy Frameworks for Emerging Markets. Edward Elgar Publishing.
IMF (2023a) Financial Access Survey. International Monetary Fund.
IMF (2023b) Fintech and Financial Inclusion in Sub-Saharan Africa. IMF Working Paper.
Jack, W. and Suri, T. (2016) The long-run poverty and gender impacts of mobile money. Science, 354(6317), 1288-1292.
Jafri, J.A. et al. (2024) A systematic literature review of the role of trust and security on Fintech adoption in banking. Heliyon, 10(1), e22980.
Kumar, N. and Ranawat, R. (2024) A systematic review of fintech development. International Journal of Scientific Research in Engineering and Management, 8(5), 1-5.
La Porta, R. et al. (2020) Law and finance after a decade of research. In Handbook of the Economics of Finance (Vol. 2, pp. 425-491). Elsevier.
Lloyd, G.B. (2021) Determinants of commercial banks’ performance in Malawi: An autoregressive distributed lag (ARDL) approach. Journal of Economics and International Finance, 13(4), 163-174.
Mishkin, F. (1996) The channels of monetary transmission: lessons for monetary policy. NBER Working Paper No. 5464.
Mishra, P. and Montiel, P. (2012) How effective is monetary transmission in low-income countries? A survey of the empirical evidence. Economic Systems, 37(2), 187-216.
Olusegun, F.J. and Adeleke, O. (2022) Impact of monetary policy transmission mechanism in west african countries. Studia Universitatis Vasile Goldiş Arad – Seria Ştiinţe Economice, 32(1), 20-42.
Omolade, A. and Ngalawa, H. (2016) Monetary policy transmission mechanism and growth of the manufacturing sectors in Libya and Nigeria. Journal of Entrepreneurship, Business and Economics, 5(1), 67-107.
Onaga, F. et al. (2023) Monetary policy transmission channels and the performance of the real sectors in selected sub-Saharan African countries: a system-GMM approach. Future Business Journal, 9(1), 49.
Otolorin, G.E. and Akpan, P.E. (2017) Effectiveness of monetary policy transmission channels in a recessed economy. SSRN Working Paper.
Ozili, P.K. (2021) Financial inclusion research around the world: A review. Forum for Social Economics, 50(4), 457-479.
Pesaran, M.H., Shin, Y. and Smith, R.P. (1999) Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94(446), 621-634.
Rahman, M.S. et al. (2024) FinTech in sustainable banking: An integrated systematic literature review and future research agenda with a TCCM framework. Green Finance, 6(1), 92-116.
UNECA (2020) Economic Report on Africa 2020: Innovative Finance for Private Sector Development in Africa. United Nations Economic Commission for Africa.
Verbeek, M. (2021) Panel Methods for Finance: A Guide to Panel Data Econometrics for Financial Applications. De Gruyter.
World Bank (2023) World Development Indicators. The World Bank.
Yermack, D. (2015) Is Bitcoin a real currency? An economic appraisal. In Handbook of Digital Currency (pp. 31-43). Academic Press.
Zanfack, L.T., Ngounou, B.A. and Domguia, E.N. (2024) Sub-Saharan Africa: is monetary policy the miracle cure for financial stability? Journal of Quantitative Economics, 23, 175-209.