Assymetric effect of fiscal and monetary policies on the stock market performance in Nigeria
DOI:
https://doi.org/10.14738/assrj.82.9406Keywords:
asymmetry, fiscal policy, monetary policy, performanceAbstract
This study investigated the asymmetric effect of fiscal and monetary policies on stock market performance from 2000:q1-2018q3 in Nigeria. The study used Auto Regressive Distributed Lag (ARDL) Bounds Test technique of cointegration to determine the equilibrium relationship among the series. After the long run relationship has been established, Vector Error Correction Model was used to analyse the data. The results showed that only anticipated fiscal policy had a negative and significant effect on the stock market performance in the third and fourth quarters of the year. In contrast, anticipated and unanticipated monetary policy as well as unanticipated fiscal policy did not exert effect on stock market performance in Nigeria. Government in Nigeria should reduce its expenditure which has the capacity to negatively influence the performance of stock market in Nigeria.
References
Abakah E.J & Poku F.A (2016). Budget deficits and stock market returns: Evidence fromGhana. Journal of finance and economics, 4 (4), p. 113-117.
Agnello. L, & Sousa, R.M (2011). Fiscal policy and asset prices. NIPE Working Paper (25).
Anghelache G.C, Jakova. S & Oanea D.C (2016). Fiscal policy and capital market performance: Evidence from EU countries from central and Eastern Europe. International journal of academic research in Accounting, finance and management sciences, 6 (2), p. 34-43.
Bjornland, H. C. & Leitemo, K, (2009). Identifying the interdependence between US monetary policy and the stock market. Journal of Monetary Economics, 56 (2), p. 275-282.
Cevik, E.I., Dibooglu, S. & Kutan, A.I. (2014). Monetary and Fiscal policy Interactions: Evidence from Energy European Economies. Journal of Comparative Economies, 42, p. 1079-1091.
Chakradhara P (2014), Do interest rates matter for stock prices? Economic and political weekly, 43 (17), p. 107-115.
Faiza S, Yasir M, Farhan S, Kamran A. & Saba S (2012), Budget deficit and stock prices: Evidence from Pakistan and India. Interdisciplinary journal of contemporary research in business, 4 (5). 47
Hu, L., Han, J. & Zhang, Q. (2018). The impact of monetary and fiscal policy shocks on stock markets: Evidence from China Emerging Markets, Finance and Trade, 54 (8), p. 1856-1871.
Jose M.G (2010). Monetary and fiscal policy interactions during the financial crisis. a presentation to the European Central Bank 2010
Joshi P & Giri A (2015). Fiscal deficits and stock prices in India: Empirical evidence. International journal of financial statistics, 3, p. 393-410.
Koh T & Maysami R (1997). A cointegration analysis of the impact of economic forces and global market integration on the Singapore stock market. Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore.
Lawal, A.I., Somoye, R.O., Babajide, A.A. & Nwanji, T.I. (2017). The effect of fiscal and monetary policies interaction on stock market performance: evidence from Nigeria. Future Business journal, https://doi.org/10.1016/j.fbj.2017.11.004.
Mbanga, C.T. & Darrat, A.F. (2016). Fiscal policy and the US stock market. Review of Quantitative Finance and Accounting, 47(4), p. 987-1002.
Michael, K., Douglas, L., Dirk, M, & Susanna, M. (2010). The Global Integrated Monetary and Fiscal Model (GIMF) –Theoretical Structure. International Monetary fund working paper, 10 (34).
Mishkin, F. S. (2001). The transmission mechanism and the role of asset prices in monetary policy NBER Working Paper No. 8617.
Onyema, J. I. (2017). Stock market response to fiscal policy in Nigeria: Empirical evidence. International Journal in Management and Social Science, 5(12), p. 247-263.
Nigerian Stock Exchange yearly and quarterly Bulletin (several issues)
Nwaogwugwa, I. C. (2018). The effects of monetary and fiscal policy on the stock market in Nigeria. Journal of Economics and Development Studies, 6(1), p. 79-85.
Osahon, O. S. & Oriakhi, D. E. (2013). Fiscal deficits and stock prices in Nigeria: An empirical evidence.
Rangan G, Charl J, & Kanyane M (2013). A time varying approach to analyzing fiscal policy and asset prices in South Africa. Working papers 2013(03), University of Pretoria.
Yuan, C. & Chen, R. (2015). Policy transmission, external imbalances and their impacts: cross country evidence from BRICS. China Economic Review, 33, p. 1-24.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Oluwayemisi Adeleke, Olusola Oyeleke
This work is licensed under a Creative Commons Attribution 4.0 International License.
