Monetary and Fiscal Policies Interactions on Stock Returns in Nigeria
DOI:
https://doi.org/10.21512/bbr.v11i1.6082Keywords:
monetary policy, fiscal policy, stock returnsAbstract
This research examined the effects of monetary and fiscal policies on stock returns in Nigeria. The researchers utilized ex-post facto research design using the time series data of the annual market values of All Share Index (ASI) of the Nigerian Stock Exchange (NSE). It was yearly data on the various monetary policy and fiscal policy variables obtained from the Central Bank of Nigeria Statistical Bulletins covering from 1985 to 2017. The result of the cointegration test reveals a long-run relationship between monetary variables and stock returns. Meanwhile, the overall result shows that monetary policy has a significant effect on stock return. However, there is no long-run relationship between fiscal policy variables and stock returns. Meanwhile, the result of the Unrestricted Vector Autoregression model shows that fiscal policy has a significant effect on stock prices in Nigeria. On the other hand, a long-run relationship exists between monetary policy, fiscal policy, and stock returns. It has a significant effect on stock returns in Nigeria. This implies that monetary and fiscal policies have a significant effect on stock returns in Nigeria. It is recommended that there is a need for the federal government to harmonize fiscal and monetary policies in the same direction and to equally design policies that promote a free market for the growth of the Nigerian economy.
Plum Analytics
References
Abata, M. A., Kehinde, J. S., & Bolarinwa, S. A. (2012). Fiscal/monetary policy and economic growth in Nigeria: A theoretical exploration. International Journal of Academic Research in Economics and Management Sciences, 1(5), 75-88.
Anghelache, G. V., 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), 34-43.
Bhatti, G. A., Ziaei, S. M., & Rehman, A. (2015). Monetary and fiscal policies variables interaction with stock returns in Malaysia. Science International (Lahore), 27(1), 449-465.
Chatziantoniou, I., Duffy, D., & Filis, G. (2013). Stock market response to monetary and fiscal policy shocks: Multi-country evidence. Economic Modelling, 30(January), 754-769.
Chunming, Y., & Ruo, C. (2015). Policy transmissions, external imbalances, and their impacts: Crosscountry evidence from BRICS. China Economic Review, 33(April), 1-52.
Ekene, O. C. (2016). Impact of monetary policy on stock returns in Nigeria. World Engineering & Applied Sciences Journal, 24(5), 1778-1787.
Galí, J., & Gambetti, L. (2015). The effects of monetary policy on stock market bubbles: Some evidence. American Economic Journal: Macroeconomics, 7(1), 233-57.
Gowriah, S., Seetanah, B., John, L. M., & Keshav, S. (2014). The effects of monetary and fiscal policies on the stock exchange: Evidence from an island economy. The Business & Management Review, 4(4), 321.
Guérin, P., & Leiva‐Leon, D. (2017). Monetary policy, stock market and sectoral comovement. Retrieved from https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/17/Fich/dt1731e.pdf
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), 1856-1871.
Jonathan, O. O., & Oghenebrume, A. D. (2017). Impact of monetary policy on stock market prices in Nigeria. Journal of Economics, Management and Trade, 19(4), 1-11.
Laopodis, N. T. (2007). Fiscal policy, monetary policy, and the stock market. In Annual International Conference on Macroeconomic Analysis and International Finance.
Lawal, A. I., Somoye, R. O., Babajide, A. A., & Nwanji, T. I. (2018). The effect of fiscal and monetary policies interaction on stock market performance: Evidence from Nigeria. Future Business Journal, 4(1), 16-33.
Lee, U. (2007). Stock returns and fiscal policy: Additional international evidence. Indian Journal of Economics and Business, 6(2), 241-256.
Lütkepohl, H., & Netšunajev, A. (2018). The relation between monetary policy and the stock market in Europe. Econometrics, 6, 1-14.
Nwakoby, C. I. N., & Alajekwu, U. B. (2016). Effect of monetary policy on Nigerian stock market performance. International Journal of Scientific Research and Management, 4(9), 4530-4442.
Nwaogwugwu, I. C. (2018). The effects of monetary and fiscal policy on the stock market in Nigeria. Journal of Economics, 6(1), 79-85.
Nwaogwugwu, I., & Evans, O. (2016). A sectoral analysis of fiscal and monetary actions in Nigeria. The Journal of Developing Areas, 50(4), 211-230.
Nwokoye, E., & Emmanuel, O. (2018). Impact of Monetary Policy on Stock Market Development: Implications for the Nigerian Economy. ECRTD - Journal of Development and Economic Sustainability, 6(4), 29-50.
Ogbulu, O. M., Torbira, L. L., & Umezinwa, C. L. (2015). Assessment of the impact of fiscal policy operations on stock price performance: Empirical evidence from Nigeria. International Journal of Financial Research, 6(2), 190-202.
Onyema, D. J. I. (2017). Stock market response to fiscal policy in Nigeria: Empirical evidence. International Journal in Management and Social Science, 5(12), 247-263.
Prukumpai, S., & Sethapramote, Y. (2019). How Does the Thai Stock Market respond to monetary and fiscal policy shocks? DLSU Business & Economics Review, 28(2), 52-68.
Sede, I. P., & Omorokunwa, O. G. (2015). The impact of fiscal and monetary policy on stock market returns in Nigeria. Journal of Resourcefulness and Distinction, 10(1), 1-12.
Suhaibu, I., Harvey, S. K., & Amidu, M. (2017). The impact of monetary policy on stock market performance: Evidence from twelve (12) African countries. Research in International Business and Finance, 42(December), 1372-1382.
Thanh, T. T. T., Thuy, L. P., Anh, T. N., Thi, T. D., & Truong, T. T. H. (2017). Empirical test on impact of monetary policy and fiscal policy on Vietnam stock market. International Journal of Financial Research, 8(2), 135-144.
Thorbecke, W. (1997). On stock market returns and monetary policy. The Journal of Finance, 52(2), 635-654.
Uwubanmwen, A., & Eghosa, I. L. (2015). Inflation rate and stock returns: Evidence from the Nigerian Stock Market. International Journal of Business and Social Science, 6(11), 155-167.
Downloads
Published
Issue
Section
License
Authors who publish with this journal agree to the following terms:
a. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License - Share Alike that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
b. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
c. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
USER RIGHTS
All articles published Open Access will be immediately and permanently free for everyone to read and download. We are continuously working with our author communities to select the best choice of license options, currently being defined for this journal as follows: Creative Commons Attribution-Share Alike (CC BY-SA)
