ABSTRACT:In an attempt to find out the degree of monetary non-neutrality in Nigeria we started from finding out the size of price rigidity in the country. Computation with Ball and Romer method showed that price rigidity is optimal decision for firms in Nigeria only when the menu cost is well above 2.28% of the firm's revenue which is on the high side, showing the likelihood of weak price rigidity in the country. Confirming this, the IRFs of the SVAR shows that the response of inflation to nominal shock has only one period lag. These combined results led to a small though persistent response of output to the nominal shock. The result of the study therefore points towards large nominal and small real effect of monetary policy in Nigeria and conclude that monetary policy will be a better option for contractionary plan but not for an expansionary plan.
Purpose
The purpose of this paper is to examine the likelihood that the presence of the deposit insurance policy encourages risk appetite behavior of banks in Sub-Saharan African (SSA). It argues that financial system stability is not a function of the choice of a deposit insurance scheme, but countries' peculiarities such as quality of institutions and the macroeconomic environment.
Design/methodology/approach
The study used the stereotype logit regression model and covers 47 SSA countries. Countries are categorized into two: explicit and implicit DIP scheme.
Findings
The study found that corrupt countries are more likely to adopt the implicit policy, while the explicit policy exposes them to credit risk, insolvency, and negative macroeconomic shocks, a reflection of weak institutions and unhealthy competition.
Research limitations/implications
Paucity of substantial local literature on institutional perspective of deposit insurance (DI) constitutes the major limitation of this study.
Practical implications
The sub-region, therefore, faces a conundrum - desiring a deposit insurance scheme, but lacking the required institutions to maintain either a publicly owned regulatory system or the ability to transplant the private club model.
Originality/value
This study contributes to the institutional perspective of DI from SSA institutional perspective.
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