Capital Market and Economic Growth in Nigeria: An Autoregressive Distributed Lag (ARDL) Bounds Testing Approach
- May 5, 2018
- Posted by: RSIS
- Category: Economics
International Journal of Research and Innovation in Social Science (IJRISS) | Volume II, Issue IV, April 2018 | ISSN 2454-6186
INIMINO, Edet Etim1, BOSCO, Itoro Ekpenyong2, ABUO, Michael Abang3
1&3 Department of Economics, Faculty of Social Sciences, University of Uyo, Nigeria
2 Department of Economics, Faculty of Social Sciences, University of Port Harcourt, Nigeria
Abstract: – The study examined capital market and economic growth in Nigeria from 1986 to 2016. The main objective of the study was to examine the impact of capital market on economic growth in Nigeria. The data for the study were sourced from CBN statistical bulletin. The Augmented Dickey-Fuller test and Autoregressive Distributed Lag model were used as the main analytical tools. The ADF unit test result revealed stationarity of the variables at order zero and one, which satisfied the requirement to employ the ARDL Bounds testing approach. The ARDL Bounds test revealed the existence of long run relationship among the variables. Moreover, the result revealed that market capitalization has positive and significant effects on economic growth both in the short and long run. Number of deals has a positive and significant effect on economic growth in the long run but negative and insignificant effect on economic growth in the short run. However, volume of transaction has a negative and significant effect on economic growth in both the long run and the short run. The result also revealed that interest rate has positive and insignificant effect on economic growth in the long run. While in the short run, it has a positive and significant effect on economic growth. Based on the above findings, the study concluded that capital market has impacted on economic growth in Nigeria and recommended among others that there should be improvement in the moribund market capitalization, by encouraging more foreign investors to participate in the market, maintain state of the art technology like automated trading and settlement practices, electronic fund clearance and eliminate physical transfer of shares. Also, regulatory authorities should restore confidence to the market by ensuring transparency and fair trading dealings and transactions in the market to enhance economic growth.
Key Words: Capital Market, ARDL, Growth and Co-integration.
