Structural Analysis of the Effect of Exchange Rate Movement on Stock Market Performance in Nigeria

Oluwasegun Olawale Benjamin and John Ojo Fatile

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the impact and causal relationship between exchange rate movement and stock market performance in Nigeria using monthly data spanning from February 2001 to December 2017. Estimated models include pre-crisis, crisis, post-crisis, and the primary model. Johanson co-integration, IGARCH (1,1) and Pairwise Granger causality techniques were used for the analysis. The result of the co-integration test suggested the absence of a long-run relationship among the variables. The estimated IGARCH (1,1) model revealed that the exchange rate and money supply have positive impact on stock market performance. Furthermore, the paper established evidence of a one-way causality from exchange rate to stock market performance in the primary and pre-crisis models and no causality during the crisis and post-crisis periods. Thus, we recommend that the monetary authority should pay close attention to exchange rate movement, address the problem of market manipulations, and employ robust measures to protect the stock market from possible future crisis.

Keywords: Exchange rate; stock market performance; financial crisis; IGARCH model. (search for similar items in EconPapers)
JEL-codes: G01 G14 G18 (search for similar items in EconPapers)
Date: 2019-02-19, Revised 2019-11-19
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https://mpra.ub.uni-muenchen.de/98337/1/MPRA_paper_98337.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:98329

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