Monetary Policy and Stock Market Performance: Evidence from Nigeria Stock Exchange Market

Justin .C. Alugbuo and Ekwugha Juliet Chika
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Justin .C. Alugbuo: (Lecturer), Department of Economics, College of Management Sciences (COLMAS), Michael Okpara University of Agriculture, Umudike, Umuahia, Abia State, Nigeria
Ekwugha Juliet Chika: (PhD Student), Department of Economics, Faculty of Social Sciences, Imo State University, Owerri, Imo State, Nigeria

International Journal of Research and Innovation in Social Science, 2020, vol. 4, issue 6, 556-568

Abstract: There have been controversies among scholars, researchers and finance professionals with regards to what triggers the movement in the stock prices from their fundamental value and it has generated questions that led to efforts to find out if monetary policy instruments affect stock market performance in Nigeria. Is it against this backdrop, that this study investigated the effect of monetary policy on stock market performance in Nigeria for the period 1981-2018. The specified model of the study was estimated using the ARDL model to determine the level of impact that one variable has on the other. While E-views 10 statistical software was employed in computing the result, time series data were obtained from World Bank national accounts data and OECD National Accounts data files and the study established that Lending interest rate had a positive relationship with all share index and also was statistically significant in the current year while Money supply had a negative relationship with ASI in the current year and in the previous lags i.e 1st, 2nd and 3rd years lag periods in the short run period but was found to have a positive relationship with All Share Index in the long run and was statistically significant at 5% level of significance, Consumer Price Index (CNPI) had a negative relationship with LASI in the current and in the 1st years lag periods and finally, Treasury Bill Rate (TRBR) had a negative relationship and significant impact on ASI in the current year period but was also found to have a positive and strong impact on ASI in the 1st lag period, based on this, the study recommended that Central bankers and stock market participants should be aware of the relationship between monetary policy and stock market performance in order to better understand the effects of policy shifts. Monetary authorities in particular face the dilemma of whether to react to stock price movements, above and beyond the standard response to inflation and output developments.

Date: 2020
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