Citations


Contact Us

For Marketing, Sales and Subscriptions Inquiries
2637 E Atlantic Blvd #43110
Pompano Beach, FL 33062
USA

Conference List

The Economics and Finance Letters

April 2014, Volume 1, 4, pp 90-103

Stock Market Performance and Economic Growth: Evidence from Nigeria Employing Vector Error Correction Model Framework

Ugochukwu E. Anigbogu

,

Eleanya K. Nduka

Ugochukwu E. Anigbogu 1 Eleanya K. Nduka 1 ,
;

  1. Department of Economics, University of Nigeria, Nsukka, Nigeria 1

Pages: 90-103

DOI: 10.18488/journal.29/2014.1.9/29.4.90.103

Share :


Abstract:

This study examines the long-run and causal relationship between stock market performance and economic growth in Nigeria for the period from 1987Q1 to 2012Q4 ¬inclusive. The study employs the Augmented-Dickey Fuller test for unit root, the Johansen (1995) Maximum Likelihood cointegration technique and Vector Error Correction Model framework to capture long-run and short-run relationships in the cointegrating vectors of Nigerian stock market and economic growth. The study further employs Granger (1969) Causality, Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) to capture shocks transmission and AR root graph for stability. The optimum lag length was selected based on the Schwartz and Hannan-Quin information criteria. The results of the cointegration test confirm that there exists a long-run relationship between stock market performance and economic growth, while the causality test results suggest that stock market performance causes economic growth with feedback. The Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) suggest that shocks from the stock market do not impede economic growth. Furthermore, the result of the AR root graph indicates that the Nigerian stock exchange market is not stable.  Hence, the current reforms and policies going on in the Nigerian stock exchange should be sustained to boost investors’ confidence and participation.
Contribution/ Originality
The paper’s primary contribution is finding that the Nigerian stock market is not stable.

Keywords:


Reference:

  1. Abiodun, L.N. and O.O. Elisha, 2012. Stock prices, stock market operations and Nigerian economic growth: A granger causality modelling. Global Advanced Research Journal of Management and Business Studies, 1(10): 375–383.
  2. Adefeso, H.A., T. Egbetunde and I. Alley, 2013. Stock market development and growth in Nigeria; A causal analysis. Arabian Journal of Business and Management Review, 2.
  3. Adenuga, A.O., 2010. Stock market development indicators and economic growth in Nigeria (1990-2009), Empirical investigations. Central Bank of Nigeria, Economic and Financial Review, 48(1): 33-70.
  4. Alajekwu, U.B. and A.A. Achugbu, 2012. The role of stock market development on economic growth in Nigeria: A time series analysis. African Research Review, 6(24): 51–70.
  5. Atoyebi, K.O., I.B. Ademola, I.K. Kadiri, O.F. Adekunjo and O.M. Ogundeji, 2013. Capital market and economic growth in Nigeria an empirical analysis. Journal of Humanities and Social Sciences 6(6): 60-68.
  6. Bayar, Y., A. Kaya and M. Yildirim, 2014. Effects of stock market development on economic growth: Evidence from Turkey. International Journal of Financial Research, 5(1).
  7. Carporale, G.M., P. Howells and A.M. Soliman, 2004. Stock market development and economic growth the causal linkage. Journal of Economic Development, 29(1).
  8. David-Wayas, W.O.M., 2014. Causal relationship between stock market performance and economic growth in Nigeria. Innovare Journal of Social Sciences, 2(1).
  9. Demirgüc-Kunt, A. and R.R. Levine, 1996. Stock market development and financial intermediaries: Stylized facts. World Bank Economic Review.
  10. Donwa, P. and J. Odia, 2010. An empirical analysis of the impact of the Nigerian capital market on her socio-economic development. Journal of Social Sciences, 42(2).
  11. El-Wassal, A.K., 2005. Understanding the growth in emerging stock markets. Journal of Emerging Market Finance, 4(3): 227-261.
  12. Garcia, F.V. and L. Liu, 1999. Macroeconomic determinants of stock market development. Journal of Applied Economics, 2(1): 29 – 59.
  13. Granger, C.W.J., 1969. Investigating causal relations by econometric models and cross spectral methods. Econometrica, 37: 424-438.
  14. Henry, O. and E.O. Olabanji, 2013. Stock market performance and sustainable economic growth in Nigeria: A bound testing cointegration approach. Journal of Sustainable Development, 6(8).
  15. Johansen, S., 1995. Likelihood-based inference in cointegrated vector autoregressive models. New York: Oxford University Press.
  16. Kalapo, F.T. and A.O. Adaramola, 2012. The impact of the Nigerian capital market on economic growth (1990-2010). International Journal of Developing Societies 1(1): 11–19.
  17. Mordi, C.N.O., 2008. Introduction to vector autoregressive (VAR) models. A Paper Presented to Staff of the Research Department of the Central Bank of Nigeria, Abuja, September.
  18. N?zue?, F.F., 2006. Stock market development and economic growth: Evidence from Côte D’Ivoire. African Development Review, 18(1).
  19. Ogboi, C. and S.O. Oladipo, 2012. Stock market and economic growth: The Nigerian experience. Research Journal of Finance and Accounting, 3(4).
  20. Ojo, O.M. and S.O. Adeusi, 2012. Impact of capital market reforms in economic growth: The Nigerian experience. Australian Journal of Business and Management Research, 2(2).
  21. Oluitan, R., 2013. The impact of capital market in the development of Nigeria economy. Research Journal in Organizational Psychology and Educational Studies, 2(5): 267-270.
  22. Oluwatonyin, S.K. and M.C. Ocheja, 2009. The impact of stock market earnings on Nigerian per capita income. African Journal of Accounting, Economics, Finance and Banking Research, 5(5).
  23. Olweny, T.O. and D. Kimani, 2011. Stock market performance and economic growth, empirical evidence from Kenya using causality test approach. Advances in Management and Applied Economics, 1(3): 153–196.
  24. Osisanwo, B.G. and A.A. Atanda, 2012. Determinants of stock market returns in Nigeria: A time series analysis. African Journal of Scientific Research, 9(1).
  25. Ozurumba, B.A. and E.E. Chigbu, 2013. An econometric analysis of capital market performance and economic growth of Nigeria. Interdisciplinary Journal of Contemporary Research in Business, 4(10).
  26. Samuel, S.E. and R.U. Oka, 2010. Efficiency of the Nigerian capital market: Implications for investment analysis and performance. Translational Corporations Review, 2(1): 42-51.
  27. Sanusi, L.S., 2010. Global financial meltdown and the reforms in the Nigerian banking sector. Being the full text of a public lecture delivered at the convocation square. Bauchi: Abubak Tafawa Balewa University.
  28. Yartey, C.A., 2007. Macroeconomic and institutional determinants of stock market development in Africa. In Okpara, John, edi., Management and economic development in Sub-Saharan Africa: Theoretical and applied perspectives. London: Adonis and Abbey Publishers.

Statistics:

Google Scholor ideas Microsoft Academic Search bing Google Scholor

Funding:

Competing Interests:

Acknowledgement:


Related Article

( 1 ) Testing the Random Walks in Korea Stock Exchange
( 2 ) Kashmir Peasant Economy under Dogra’s: A Case Study of Agrarian Produce and Livestock 1885-1925 A.D
( 3 ) Driving Role of Institutional Investors in the Indian Stock Market in Short and Long-Run – An Empirical Study
( 4 ) Reminiscing Stock Splits Announcement: A Malaysian Case
( 5 ) Testing the Random Walk: The Case of Hong Kong Stock Exchange
( 6 ) Earnings Management and Stock Market Returns
( 7 ) Stock Market Performance and Economic Growth: Evidence from Nigeria Employing Vector Error Correction Model Framework
( 8 ) Stock Market Index Prediction with Neural Network during Financial Crises: A Review on Bist-100
( 9 ) The Impact of the Global Financial Crisis on the Debt, Liquidity, Growth, and Volume of Companies in Palestine Stock Exchange
( 10 ) Studying the Integration of Damascus Securities Exchange with Selected Stock Markets
( 11 ) Does Gold Price Lead or Lags Islamic Stock Market and Strategy Commodity Price? A Study from Malaysia
( 12 ) The Effect of Internal and External Factors of Companies on Profitability and its Implications on Stock Price Index of State-Owned Banks
( 13 ) Regime Changes in the Volatility of Stock Markets
( 14 ) Optimal Stock Portfolio Issuers of Building Construction Registered in LQ45 Based on the Markowitz Approach
( 17 ) The Dynamics of Land Market and Food Security in Malawi
( 19 ) The Biodiesel Market in Brazil and the Prospects for the Sector
( 21 ) Estimating Value at Risk for Sukuk Market Using Generalized Auto Regressive Conditional Heteroskedasticity Models
( 22 ) The Mediating Effect of Market Orientation on the Relationship between Entrepreneurial Orientation Dimensions and Organizational Performance: A Study on Banks in Libya
( 24 ) Market Share and Profitability Relationship: A Study of the Banking Sector in Nigeria
( 25 ) Is Alumni Salary an Appropriate Metric for University Marketers?
( 27 ) Financial Market Predictions with Factorization Machines: Trading the Opening Hour Based on Overnight Social Media Data
( 28 ) Incorporating Islamic Ethic Elements into Marketing Mix Paradigm
( 29 ) Impact of Telecommunications Market Liberalization on Labor Productivity in Economic Community of West African States
( 30 ) Foreign Direct Investment in Zimbabwe: The Role of Uncertainty, Exports, Cost of Capital, Corruption and Market Size
( 31 ) Impact of Network Finance Development on Inflation: Evidence from Chinese Market
( 32 ) Correlation between Financial Difficulties and Financing Strategies among Market Stallholders in Batangas City
( 34 ) Assessing the Perceived Value of Customers for being Satisfied towards the Sustainability of Hypermarket in Malaysia
( 35 ) Improved Performance Through Empowerment of Small Industry
( 36 ) Teachers Characteristics and Students’ Performance Level in Senior Secondary School Financial Accounting
( 37 ) Conceptual Framework of Green Infrastructure Performance Evaluation for Local Authority
( 38 ) The Association Between Corporate Risk Disclosure and Firm Performance in Emerging Country – The Case of Egypt
( 39 ) Moderating Effect of Demographics on Monetary Motivation and Employees Job Performance Relationship: Evidence from Malaysia
( 41 ) The Influence of Information Technology and Communication Supply Chain Management Performance for Greater SME Manufacturing in Aguascalientes
( 42 ) Leveraging Telematics for Optimal Fleet Performance
( 43 ) Share Options, Share Award and Firm’s Performance: Evidence from Malaysian Public Listed Companies
( 44 ) The Effect of Outsourcing on Anglogold Ashanti Obuasi Mines Performance
( 46 ) The Investment Performance of Socially Responsible Investment in Japan
( 47 ) Appointment of Directors and Performance of Deposit Money Banks in Sub Saharan Africa: Do We Need More Executive or Non-Executive Directors?
( 48 ) Emotional Workgroup Performance and Group Effectiveness Egyptian Context
( 49 ) The Indirect Impact of Overconfidence on the Performance of Tunisian Firms Through their Financing Structure
( 50 ) How the Principles of the Sharing Economy Can Improve Organizational Performance of the US Public School System
( 51 ) Relevance of Stakeholders Theory, Organizational Identity Theory and Social Exchange Theory to Corporate Social Responsibility and Employees Performance in the Commercial Banks in Nigeria
( 52 ) The Influence of Communication, Work Motivation and Career Development on Elementary School Teacher’s Job Performance in Medan, Indonesia
( 53 ) Effects of Corporate Social Responsibility on Banks Financial Performance in Nigeria: A Study of United Bank of Africa
( 54 ) The Moderating Effect of Governance Mechanisms on the Relationship Between Innovation Strategy and the Performance
( 55 ) Electronic Banking Innovations and Selected Banks Performance in Nigeria
( 56 ) An Empirical Investigation into the Key Drivers of Economic Performance in the CEMAC Zone: A Panel Corrected Standard Errors Approach
( 57 ) The Impact of Organisational Culture on Public Sector Performance: A Case Study of Local Authorities in Zimbabwe
( 58 ) Gamification on Sales Force Performance in Nigeria Bottling Company
( 59 ) An Investigation of the Impact of Organisational Structure on Organisational Performance
( 60 ) Exploring the Asymmetric Linkage between Commodity Prices and Fiscal Performance in Nigeria
( 61 ) Effects of Socio-Cultural Diversity on the Performance of Private Health Care Organizations in Kogi State
( 62 ) Organizational Memory and Employee Performance in Federal Parastatals in Enugu State of Nigeria
( 63 ) The Effect of Corporate Social Responsibility Disclosure on Corporate Financial Performance
( 64 ) Consideration the Relationship Between Information Communications Technology and Economic Growth in Top 10 Economic
( 65 ) Shifting Global Economic Paradigm
( 66 ) How Telecommunication Development Aids Economic Growth: Evidence from Itu Ict Development Index (IDI) Top Five Countries for African Region
( 67 ) The Prospects of Accounting and Economic Systems in the Era of Global Knowledge Economy
( 68 ) Labor and Economic Growth in Zimbabwe
( 69 ) The Impact of Human Capital on Economic Growth: Evidence from Tunisia Using Star and Stecm Models
( 70 ) Exchange Rate Movements, Import And Economic Growth in Nigeria (1986-2010)
( 71 ) Impact of Food Beverage Price Index and Exchange Rate Volatility on Economic Growth
( 72 ) Long-Run Relationships and Causality Tests Between Military Expenditure and Economic Growth in India
( 73 ) Public Infrastructure Spending and Economic Growth in Nigeria: An Error Correction Mechanism (ECM) Approach
( 74 ) Study of the Relationship between Economic Growth and Inflation: Application to the Countries of the South Side of the Mediterranean: A Panel Data Approach
( 75 ) The Entrepreneurship, Knowledge Spillover and Economic Growth
( 76 ) Corruption’s and Democracy’s Effects on Economic Growth
( 77 ) Relationships between Financial Development and Economic Growth: A New Approach by Inputs
( 78 ) Impact of Microfinance Lending On Economic Growth of Third world Nations: Study of Nigeria
( 79 ) The Role of Information and Communication Technology in Rural Socio-Economic Development in Africa
( 80 ) Dividend Policy Relevancy in Theoretical and Practical Economics
( 81 ) Consideration the Effects of Water Sector Investment on Economic Growth in Iran
( 82 ) Is Brics a Viable Solution for Russia in the Context of the Present Eu’s Economic Sanctions?
( 84 ) Rural Saving Mobilizations and Economic Development in Akamkpa Local Government Area of Cross River State - Nigeria
( 85 ) Nigerian Politics, Economic Development, and the Role of Human Rights Organisations on Elections
( 86 ) Rural - Urban Balance as a Measure of Socio-Economic Development with Special Reference to Iran
( 87 ) Causal Relationship between Imports and Economic Growth in Zimbabwe: An Empirical Analysis 1975 – 2013
( 88 ) The Effect of Access and Quality of Education on Economic Development in Botswana
( 89 ) Panel Data Analysis of the Impact of Economic Freedom as Well as Economic Conditions, The Quality of Life, and Public Education Spending on U.S. Undocumented Immigrant Settlement Patterns
( 90 ) Dynamics of Inflation, Economic Growth, Money Supply and Exchange Rate in India: Evidence from Multivariate Analysis
( 91 ) Structural Breaks, Electricity Generation and Economic Growth in Nigeria
( 92 ) Comparative Analysis of the Effectiveness of Coub-Douglas, Real Business Cycle, and Keynsian Growth Models in Determining Economic Growth in Nigeria
( 93 ) The Link Between Agricultural Budgetary Allocation and Economic Growth in Nigeria
( 94 ) Financial Deepening, Interest Rate Spread and Economic Growth: New Evidence from Sub-Sahara Africa
( 95 ) China Pakistan Economic Corridor (CPEC): Analysis of Internal and External Challenges
( 96 ) A Case Study of Local Government Implementation of the Ward Based Local Economic Development (LED) Program
( 97 ) Military Regimes and Nigeria’s Economic Development, 1966-1999
( 98 ) An Investigation of the Relationship between Manufacturing Output and Economic Growth : Evidence from Nigerias Data Set
( 99 ) Scenario Economic Impact Analysis of Offshore Fishing Tournaments in Ocean City
( 100 ) Macroeconomic Indicators and Capital Formation Growth in Nigeria: A New Evidence
( 102 ) Disaggregated Foreign Capital Inflows and Economic Growth in a Developing Economy: Empirical Evidence from Nigeria
( 104 ) Assessment of Dual Carriageway for Sustainable Socio-Economic Development in Ado Ekiti, Nigeria
( 105 ) Industrialization and Economic Growth in Sub-Saharan Africa: The Role of Human Capital in Structural Transformation
( 106 ) Does Agricultural Sector Contribute to the Economic Growth in Case of Republic of Benin?
( 107 ) Uncertainties in Global Economic Policy and Nigerias Export Earnings
( 108 ) Public Health Expenditure, Economic Growth and Health Outcomes in Nigeria
( 109 ) External Debt and Economic Growth: Two-Step System GMM Evidence for Sub-Saharan Africa Countries
( 110 ) Impact of Exchange Rate Fluctuation on Selected Economic Sectors of the Nigerian Economy
( 111 ) The Colonialists & Indigenous Exchange Currency: Tracing the Genesis of Socioeconomic Woes in Postcolonial Nigeria
( 112 ) The Transitional Relationship between Economic Growth and Exchange Rate in Ghana: An Empirical Approach
( 113 ) Estimating the Economic Determinants of Technical Efficiency of Bioenergy in EU-28: An Application of Tobit Analysis
( 114 ) The Impact of Military Spending on Economic Wellbeing in Nigeria
( 115 ) The Relationship between Financial Development, Economic Growth, and Inflation: Evidence from Southeast Asia
( 122 ) New Evidence on the Link Between Income Inequality and Misery Index: A Nonlinear Time Series Analysis
( 125 ) The Nexus between Financial Crisis and Household Consumption: Evidence from Emerging Countries
( 126 ) Effective Tax Administration and Institutionalization of Accounting Systems in Small and Medium Scale Enterprises: Evidence from Nigeria
( 128 ) The Impact of Dividend Policy on Shareholders’ Wealth before and After Financial Melt down: Evidence from FMCG Sector in India
( 131 ) Impact of Inflation on Per Capita Income in Emerging Economies: Evidence from BRICS Nations
( 132 ) Does Managerial Emotional Biases Affect Debt Maturity Preference? Bayesian Network Method: Evidence from Tunisia
( 133 ) Empirical Evidence on Municipal Tax Policy and Firm Growth
( 134 ) The Effect of Exchange Rate Changes on Consumer Prices in Nigeria: Evidence from VECM Model
( 135 ) Testing the PPP Using Unit Root Tests with Structural Breaks: Evidence from Politically Unstable Arab Countries
( 137 ) Does the Holiday Effect Differ from Religious to Non-Religious Holidays? Empirical Evidence from Egypt
( 139 ) What Drives Banking Stability? Empirical Evidence from ECOWAS Countries
( 140 ) The Profitability of Momentum Strategies: Empirical Evidence from Damascus Securities Exchange (DSE)
( 143 ) Foreign Capital Inflows and Unemployment in Nigeria: A New Evidence from ARDL-Bounds Testing Approach
( 144 ) Forecasting Equity Index Volatility: Empirical Evidence from Japan, UK and USA Data
( 145 ) Intention to Use E-Recruitment System: Empirical Evidence from Jobseekers in the Advertising Industry in Malaysia
( 147 ) Exchange Rate and Foreign Reserves Interface: Empirical Evidence from Nigeria
( 158 ) Climate Change Adaptation in Semi-Arid Dodoma: An Experience from Eco-Village
( 164 ) Academic Mobility for Engineering and Technology Graduates in Africa: Lessons and Experiences from the Implementation