Effect of Monetary Policy in Banking Industry in Nigeria Essay

1082 Words Dec 28th, 2010 5 Pages
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 AREA OF STUDY The area of study o this research work is to determine the effect of monetary policy on the performance of banks in Nigeria. This study will cover all the commercial banks that have been in existence since 1975-2004. More so, the aggregates rate is used in assessing their performance.
3.2 METHOD OF INVESTIGATION/SOURCE OF INFORMATION According to Asika (2002), research work can be defined as the restructuring of investigation aimed at identifying variables and their relationship to one another. This is used for the purpose of obtaining data to enable the researcher test hypothesis or answer research questions. This study relies principally on secondary data. The sources of these
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3.6 VALIDATION O RESEARCH INSTRUMENTS AND TESTING Validity is defined as the extent or degree to which a measuring instrument measures what it is designed to measures. Every measuring instrument is designed for a specific purpose. A measuring instrument is said to be valid if it enables the researcher to measure the correct responses from the sample subjects. Similarly, a measuring instrument is valid when the result elicited from it serves the purpose for which it is intended.
3.7 DATA ANALYSIS TECHNIQUE The data is analyzed using econometric techniques and descriptive statistical analysis. The values of Durbin-Watson Statistics will show the existence of serial correlation in some of the specification.
3.7.1 MODEL SPECIICATION From the above discussions, the profit function of the commercial banking industry assumes the reduced form: P= ∑(r, er, rv, cr, pl, w)………….. (1)
Where;
* P - Banks’ performance measure (interest earnings as a ratio of total assets of commercial banks: return on assets, that is, ratio of gross profit to their total assets, and return on capital for the industry, that is, the ratio of gross profit to industry paid-up capital); * r - Interest rate (savings or lending and their spread); * er - Exchange rate is the price of one currency in terms of other currencies: It therefore denotes the numerical values of the domestic currency of the country at the given time in relations to those countries with which the country

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