Impact of Monetary Policy on Stock Market Prices in Nigeria
Journal Title: Journal of Economics, Management and Trade - Year 2017, Vol 19, Issue 4
Abstract
The paper investigated the relationship between monetary policy and stock market prices in Nigeria and through assess whether monetary policy influences stock market prices, for the period 1985 to 2015. The Dynamic and Fully Modified Ordinary Least Squares (DOLS & FMOLS) techniques were used for the analysis, while the error correction model (ECM) framework was deployed for robustness. A long-run equilibrium relationship was found among the variables used. The empirical results indicated that monetary policy rate, credit to private sector, exchange rate and broad money supply are positively related to stock market prices captured by the all share index in either the DOLS or FMOLS frameworks. Exchange rate and broad money supply were found to have statistically significant impact on stock market prices. The estimated ECM equations showed that the short-run determinants of stock prices are largely from are credit to private sector, exchange rate and one period lagged exchange rate; while monetary policy rate and broad money supply have a negative relationship with stock market prices in the short-run. It is therefore evident from the results of this study that some monetary policy instruments can be a better predictor of stock market prices in Nigeria. In the light of this, it is recommended that monetary authorities should be cautious enough to avoid discretionary policies that might hike the rate of interest; otherwise the flow of fund to the market will be derailed. Also, the government should fine turned the exchange rate policy and institute a consistent policy plan to mobilize surplus funds from abroad, which would be injected into the capital market for significant development
Authors and Affiliations
Oniore O. Jonathan, Akatugba D. Oghenebrume
Keywords
Related Articles
- EP ID EP319888
- DOI 10.9734/JEMT/2017/37882
- Views 163
- Downloads 0
Risk and Risk Management Practices of Rice Millers in Selected Local Government Areas in Cross River State, Nigeria
The study is on risk and risk management practices of rice millers in selected Local Government Areas in Cross River State, Nigeria. Specifically, the study analyzed the perception of rice millers on sources of risk in r...
The Environment of Small and Medium-sized Enterprise (SME) of the Developing Countries: Vector or Inhibitor for Their International Performance?
The main purpose of this paper is to describe and explain the performance of small and medium-sized enterprises abroad. This concern is motivated by the results of numerous studies that make Cameroonian Small and medium-...
Econometric Modelling of Income-consumption Relationship: Evidence from Nigeria
This paper seeks to empirically verify the dynamic relationship between consumption expenditure and income in Nigeria by experimenting with two major income hypotheses, the habit persistence and permanent income hypothes...
Channels of Foreign Remittances and their Relative Efficiency in Sylhet Region of Bangladesh
The study examines the different channels of receiving foreign remittances and measures their relative efficiency in selected areas of Sylhet region in Bangladesh. The study was carried out based on the primary data coll...
Heterogeneity and Differentiation of Job Satisfaction Determinants: Evidence from Private Universities in Ghana
The purpose of this study is to investigate the factors that affect job satisfaction of the different subgroups of workers in private universities. A survey of 600 workers was conducted regarding job satisfaction levels...