Stock market development and economic growth in Nigerian (1980-2009)
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Date
2013-01
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Babcock Journal of Management and Social Sciences (BJMASS, the Faculty of Management and Social Sciences, Babcock University, Ilishan-Remo, Ogun State
Abstract
The stock market as a sub-set of financial system is an indicator of financial health of the economic system and its development has been found to have impacts on economic growth. This study investigates the nature of relationship between stock market development and economic growth in Nigeria using time series data from 1980 - 2009. The error correction mechanism is used in analyzing the relationship. Two measures of stock market development namely size and liquidity are employed for this study. Findings reveal that in the long-run, stock market development has a positive and significant relationship with economic growth while the short—run relationship is positive but inconclusive. Granger causality tests indicate a unidirectional causality from economic growth to the stock market. This implies that in the Nigerian context, it is growth in the economy that leads to development in the stock market. Based on these findings, recommendations are made for regulatory authorities to put in place, growth induced policies that will deepen and develop the stock market.
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Keywords
stock market, financial system, economic growth, Nigerian