This research examines the relationship between monetary policy variables and their influence on the Nigerian stock exchange market from 1985 to 2023. Utilizing data from the World Bank and the Central Bank of Nigeria's statistical bulletin, the study employs the Johansen Cointegration test and the Vector Error Correction Model to analyze long-term relationships and short-term dynamics. The findings reveal an inverse relationship between certain monetary policy variables and the stock market, alongside evidence of positive impacts from others. These results underscore the complex interplay between monetary policy and market performance. The paper concludes by recommending further investigation into additional monetary variables that may influence the Nigerian stock exchange market.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Literature Review
- Theoretical Framework
- Empirical Review
- Model Specification
- Result
- Augmented Dickey Fuller Test
- Johansen Cointegration Test
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper investigates the relationship between monetary policy variables and their impact on the Nigerian stock exchange market from 1985 to 2023. The study aims to determine the influence of these variables on market performance.
- Impact of monetary policy on the Nigerian stock market
- Relationship between monetary variables (exchange rate, deposit rate, inflation, lending rate) and stock market performance
- Analysis of the long-run and short-run effects of monetary policy
- Application of econometric models (Johansen Cointegration test and Vector Error Model) to analyze the data
- Recommendations for further research on other relevant monetary variables
Zusammenfassung der Kapitel (Chapter Summaries)
Introduction: This chapter introduces the concept of monetary policy and its influence on the economy, specifically focusing on its impact on the stock market. It explains the direct and indirect ways monetary policy affects the stock market through interest rate control and market operations. The chapter emphasizes the importance of the stock market in economic growth, particularly in developing economies like Nigeria, highlighting the roles of equity and debt markets in providing funding for investors. The chapter sets the stage for the subsequent analysis by underscoring the significance of monetary policy in maintaining stock market stability and economic growth, demonstrating the detrimental effects of market crashes and the methods used by monetary authorities to mitigate negative impacts.
Literature Review: This section explores existing theoretical and empirical studies related to the impact of monetary policy on stock markets. It presents the monetarist theory of Milton Friedman, highlighting his views on the role of central banks in managing money supply and influencing economic growth. The chapter also reviews previous research on the relationship between macroeconomic indicators (money supply, inflation, interest rate) and stock prices in Nigeria, noting both agreements and divergences with studies in other countries. It also includes discussion of research that examined the long-run association between stock market performance and various macroeconomic variables in Nigeria, including industrial production and interest rates. The chapter lays the groundwork for the empirical analysis by summarizing the key findings and perspectives of relevant past research.
Empirical Review: This chapter presents a review of several empirical studies focusing on the relationship between various macroeconomic variables and the Nigerian stock market. The studies examined used various methods such as multivariate regression analysis to investigate the relationship between variables such as money supply, inflation, interest rates and stock prices. Key findings from these studies are presented, highlighting both similarities and differences in the results across various research papers. The chapter concludes by consolidating the diverse findings from previous works to provide context for the current study's methodology and expected outcomes. This contextualization helps to justify the chosen methodologies and the anticipated research questions.
Model Specification: This chapter details the econometric model used to analyze the relationship between monetary policy variables and the Nigerian stock market. It identifies the key variables—All-Share Index (ASI), exchange rate (ER), inflation (INFL), lending rate (LR), and deposit rate (DR)—and explains their selection as proxies for broader economic indicators. The chapter outlines the methodology employed, specifying the form of the econometric model and describing the data sources. The period of analysis (1985-2023) is stated, with the sources of data (World Bank and Central Bank of Nigeria statistical bulletin) clearly identified. This clear description of the model allows for transparency and reproducibility of the study's methods.
Result (Augmented Dickey Fuller Test and Johansen Cointegration Test): This chapter presents the results of the econometric analysis. It begins by outlining the Augmented Dickey Fuller (ADF) test results, indicating the stationarity of the variables. It notes that some variables required differencing to achieve stationarity. The chapter then presents the results of the Johansen cointegration test, which assesses the long-run relationship between the variables. The interpretation of the test statistics (Trace statistics and critical values) is presented, indicating the acceptance or rejection of the null hypothesis of no cointegration. This detailed explanation of the statistical tests provides evidence for the existence (or not) of a long-run relationship between the variables of interest, crucial to understanding the impact of monetary policy on the stock market.
Schlüsselwörter (Keywords)
Monetary policy, Nigerian stock market, exchange rate, inflation, lending rate, deposit rate, stock prices, macroeconomic variables, cointegration, Vector Error Correction Model, economic growth, interest rate, money supply.
Häufig gestellte Fragen
What is the primary focus of this document?
This document provides a comprehensive language preview of a research paper analyzing the relationship between monetary policy variables and the Nigerian stock exchange market from 1985 to 2023. It includes the table of contents, objectives, key themes, chapter summaries, and keywords.
What is included in the "Inhaltsverzeichnis (Table of Contents)" section?
The table of contents outlines the structure of the research paper, including sections like Introduction, Literature Review (with a subsection on Theoretical Framework), Empirical Review, Model Specification, and Result (with subsections on Augmented Dickey Fuller Test and Johansen Cointegration Test).
What are the main "Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)" of the study?
The study aims to investigate the impact of monetary policy on the Nigerian stock market. Key themes include the relationship between monetary variables (exchange rate, deposit rate, inflation, lending rate) and stock market performance, analysis of long-run and short-run effects, application of econometric models, and recommendations for further research.
Can you summarize the "Introduction" chapter?
The Introduction chapter introduces the concept of monetary policy and its influence on the economy, particularly its impact on the stock market. It highlights the importance of the stock market in economic growth, especially in developing economies like Nigeria, and underscores the significance of monetary policy in maintaining stock market stability.
What does the "Literature Review" section cover?
The Literature Review explores existing theoretical and empirical studies related to the impact of monetary policy on stock markets. It presents the monetarist theory of Milton Friedman and reviews previous research on the relationship between macroeconomic indicators and stock prices in Nigeria.
What is discussed in the "Empirical Review" chapter?
The Empirical Review chapter presents a review of several empirical studies focusing on the relationship between various macroeconomic variables and the Nigerian stock market. It discusses studies that have used methods such as multivariate regression analysis to investigate the relationship between variables such as money supply, inflation, interest rates and stock prices.
What is detailed in the "Model Specification" chapter?
The Model Specification chapter details the econometric model used to analyze the relationship between monetary policy variables and the Nigerian stock market. It identifies key variables such as the All-Share Index (ASI), exchange rate (ER), inflation (INFL), lending rate (LR), and deposit rate (DR), and explains the methodology and data sources used.
What are the key findings presented in the "Result (Augmented Dickey Fuller Test and Johansen Cointegration Test)" chapter?
The Result chapter presents the results of the econometric analysis, including the Augmented Dickey Fuller (ADF) test results for stationarity and the Johansen cointegration test results for the long-run relationship between the variables. It provides an interpretation of the test statistics and their implications.
What "Schlüsselwörter (Keywords)" are associated with this research?
The keywords include Monetary policy, Nigerian stock market, exchange rate, inflation, lending rate, deposit rate, stock prices, macroeconomic variables, cointegration, Vector Error Correction Model, economic growth, interest rate, and money supply.
- Quote paper
- Paul Ukonu (Author), 2024, The Impact of Monetary Policy Variables on the Nigerian Stock Exchange Market (1985-2023), Munich, GRIN Verlag, https://www.grin.com/document/1519484
