Capital Market and Economic Growth in Nigeria: An Autoregressive Distributed Lag (ARDL) Bounds Testing Approach
DOI:
https://doi.org/10.47747/financeinvestmentderivative.v1i2.113Keywords:
capital market, ARDL, economic growth, bounds test, causalityAbstract
The role of the capital market in the growth and development of any economy need not be over-emphasized. The capital market is a complex institution and mechanisms through which economic units desirous to invest their surplus fund, interact directly or through financial intermediaries with those who wish to procure funds for their businesses. The Nigerian capital market started operations in mid-1961 with eight stocks and equities; with about seven United Kingdom (UK) firms quoted on the Nigerian Stock Exchange (NSE) which had, at the same time, dual quotations on the London Stock Exchange. This study examined the impact of the capital market on economic growth in Nigeria from 1981 to 2018. The expo facto research design was adopted for this study. The time-series data for the study were sourced from CBN statistical bulletin. Autoregressive Distributed Lag (ARDL) was used with the aid of e-view 10 software. The ARDL Bounds test revealed the existence of a long-run relationship among the variables. The result revealed that market capitalization has positive and insignificant effects on economic growth both in the short and long run. There is unidirectional causality among the variables. The study recommended that regulatory authorities should restore confidence in the market by ensuring transparency and fair trading dealings and transactions in the market to enhance economic growth. There should be an improvement in the moribund market capitalization, by encouraging more foreign investors to participate in the market, maintain a state of the art technology like automated trading and settlement practices, electronic fund clearance, and eliminate physical transfer of shares.
References
Atoyebi, K., Ishola, S. A., Kadiri, K. I., Adekunjo, F. O. & Ogundeji, M. O. (2013). Capital
market and economic growth in Nigeria. An empirical analysis. Journal of Humanities and Social Sciences, 6(6): 60-68.
Central Bank of Nigeria (2004), “Nigeria: Major Economic, Financial and Banking Indicators” Retrived from: http://www.cenbank.org/documents/Statbulletin.asp 24/9/2019
Demirgue - Kunt A, & Asli Levin R. (1996) Stock market, corporate finance and economic
growth: An overview. The World Bank Review.10(2):223-236.
Fry, M.J. (1988). Money, Interest, and Banking in Economic Development. John Hopkins
University Press, Johns Hopkins Studies in Development series Baltimore and London ibacnet.org/bai2007/proceedings /Papers/2007bai7443.doc.
Khan MS, Villanueva D. (1991) Macroeconomic policies and long- term growth: a conceptual
and empirical review. IMF Working Paper WP/91128, International Monetary Fund, Washington DC
Inimino, E. E., Bosco, I. E. ,& Abuo, M. A. (2018) Capital market and economic growth in
Nigeria: An autoregressive distributed lag (ARDL) bounds testing approach. International Journal of Research and Innovation in Social Science 2(4) 87-96.
King GR, Levine R.(1993) Finance and growth: Schumpeter might be right. The quarterly
Journal of Economics.108(3):717- 737
Levine R,& Zervos S. (1996) Stock market development and long run growth. The World BankEconomic Review. 10(3):323-339
MacKinnon, R.I. (1973). Money and capital in economic development”, Washington, DC:
Brookings Institution. Markets, Journal of Financial Research, Vol. 26, pp. 275-299.
Muritala, T. A. and Ogunji, M. (2017). Does the capital market spur economic growth?
Evidence from Nigeria. Journal of Corporate Finance Research, 11(1), 90-99
Odo, S. I., Anoke, C. I., Onyeisi, O. S. and Chukwu, B. C. (2017). Capital market indicators and economic growth in Nigeria; An autoregrssive distributed lag (ARDL) model. Asian Journal of Economics, Business and Accounting 2(3): 1-16.
Okereke, O. N. (2000). Stock market financing options for public projects in Nigeria.The
Nigerian Stock Exchange Fact Book, pp. 41 – 49.
Okoye, P. V. C., Okoye, J. F. N. and Ezejiofor, R. A. (2015). The impact of capital market
efficiency as a panacea to the economic growth in Nigeria. International Journal of Financial Economics 4, (3), 122-134
Okpoto, S. I. (2015). Capital market and Nigeria‟s economic growth (1980-2013). Journal of
Policy and Development Studies 9(4), 98-112.
Pesaran, M.H. and Shin, Y. (1999). An Autoregressive Distributed Lag Modelling Approach to
Cointegration Analysis. Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Strom, S. (ed.) Cambridge University Press.
Pesaran, M.H., Shin, Y. and Smith, R. (2001). “Bounds Testing Approaches to the Analysis of
Level Relationships.” Journal of Applied Econometrics, 16, 289–326.
Pagano, M. (1993), Financial Markets and Growth: An overview. European Economic
Review, Vol. 37, pp. 613-622
Stiglitz J. E& Weiss A. (1981) . Credit rationing in market with imperfect information. The
American Economic Review. 71(3):393–410.
Schumpeter, J.A. (1911) The theory of economic development. Cambridge, MA: Harvard
University Press.
Yadirichukwu, E. and Chigbu, E. E. (2014). The impact of capital market on economic
growth: The Nigerian perspective. International Journal of Development and Sustainability, 3 (4), 838-864.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2020 Panan Danladi Gwaison, Livinus Nkuri Maimako, Pokyes Shekara Mwolchet
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright for this article is retained by the author(s), with first publication rights granted to the journal.
It is an open-access article distributed under the terms and conditions of the Creative Commons Attribution license (http://creativecommons.org/licenses/by/4.0/)
