THE IMPACT OF REAL INTEREST RATE ON INCOME INEQUALITY: EVIDENCE FROM NIGERIA

Abstract

The study investigates the impact of real interest rates on income inequality in Nigeria from 1995 to 2022. This study adopts ARDL regression analysis to investigate the impact of real interest rates on income inequality in Nigeria. The study finds that the real interest rate has a strong significant negative impact on income inequality while per capita GDP and unemployment rate have no impact on income inequality in Nigeria. The study also reveals that there is no existing long-run relationship between real interest rates and income inequality in Nigeria. The study recommends that policymakers should design a policy that will lower the real interest rate which leads to higher income which benefits the poor and a reduction in income inequality.