THE RELATIONSHIP BETWEEN FINANCIAL MARKET LIBERALIZATION, STOCK MARKET PERFORMANCE AND ECONOMIC GROWTH IN NIGERIA

THE RELATIONSHIP BETWEEN FINANCIAL MARKET LIBERALIZATION, STOCK MARKET PERFORMANCE AND ECONOMIC GROWTH IN NIGERIA

Author by Dr. Peter Ogbebor

Journal/Publisher: Unilag Journal Of Business

Volume/Edition: 4

Language: English

Pages: 189 - 204

Abstract

ABSTRACT

Financial liberalization and stock market performance are stated to improve economic growth through reduction of cost of capital, risk sharing, deepening of equity markets, market integration, amongst others. In the case of frontier markets, these benefits have not crystalized. In order to assess how Nigeria as a frontier market has fared in this direction, this study used a Vector Autoregressive (VAR) approach involving tests of unit roots, cointegration and variance decomposition in examining the relationship between gross domestic product and turnover ratio, financial liberalization index and investment from 1986 – 2016 to establish the veracity of the assertion that financial liberalization and stock market performance have impacted economic growth in Nigeria. The results show that any shock that increases turnover ratio, financial liberalization and investment tends to improve economic growth in the long term, hence, we conclude that financial market liberalization and stock market performance have impacted economic growth in Nigeria. By implication, this validates the veracity of claims in some earlier studies that financial liberalization and stock market performance positively impact economic development especially in frontier and emerging markets.


Other Co-Authors