Capital Market Dynamics, Macroeconomic Instability, and Economic Growth in Nigeria: A VECM–Quantile-On-Quantile Regression Approach

This study investigates the heterogeneous nexus among capital market development, macroeconomic instability, and economic growth in Nigeria over 1985–2022. Departing from prevailing ARDL-based frameworks, the study adopts a two-stage methodology: the Johansen–Juselius Multivariate Cointegration and Vector Error Correction Model (VECM) to identify long-run equilibrium dynamics, and the Quantile-on-Quantile Regression (QQR) framework (Sim and Zhou, 2015) to map the full distributional dependence between capital market variables, macroeconomic indicators, and economic growth. Using quarterly data on Market Capitalization (MCP), All Share Index (ASI), Number of Shares Traded (NOS), Inflation (INF), Exchange Rate (EXC), Fiscal Deficit (FD), and Government Debt (GD), results confirm four cointegrating vectors and a speed of adjustment of approximately 8.9 percent per quarter. QQR analysis reveals that the positive growth effect of market capitalization intensifies only when both variables are in upper quantile states, that inflation is most destructive during low-growth regimes, and that government debt has a non-monotonic, threshold-dependent relationship with growth. These findings carry significant implications for heterogeneity-aware capital market and macroeconomic policy in Nigeria.

Capital Market; Economic Growth; VECM

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