Open Market Operations and Macroeconomic Stability in Nigeria: An Application of Co-Integration and Error Correction Modeling

This paper seeks to empirically assess the impact of indirect tool of monetary control on macroeconomic stability in the Nigerian economy. Four key areas were modeled using a static model. Results from both static and dynamic models were presented and the latter model yields more consistent and significant coefficients. Further, the error correction term in the four models was significant and correctly signed. The paper established case for macroeconomic stability through effective conduct of OMO operations in the long run. It supports the recapitalization measure of the CBN aimed at strengthening the financial system and better performance of the economy.