The Implication of Effectivenessof Demand for Money on Economic Growth

The demand for money plays a major role in macroeconomic analysis, especially in selecting appropriate policy. This brings in the demand for money function which expresses a mathematical relationship between the quantity of money demanded and its various determinants; interest rate, income, price level, credit availability, frequency of payments etc. Aggregate demand will be affected only in so far as consumption or investment is affected by the change in the interest rate. Against this background, the task in this paper is to empirically analyze and examine the implication of the effectiveness of demand for money on economic growth performance within the Nigerian context between the periods of 1970-2008 through the use of the application of Ordinary Least Square method, the multiple linear regression analysis on E-views 7.0. The paper therefore concludes that money demand has a major effect on the aggregate demand which accounts for the GDP of the economy. This implies that by ensuring efficiency in demand for money, aggregate demand would be achieved and adequately sustained growth that will ensure that inflation is at minimum will be achieved in the economy.