A Monthly Data Analysis of the Impact of Inflation and Exchange Rate on NSE Index

Michael Ogunmuyiwa () and Babatunde A. Okuneye

Journal of Empirical Economics, 2014, vol. 3, issue 2, 56-62

Abstract: This research study investigates the impact of inflation and exchange rates on the performance of the stock market in Nigeria. Using Consumer Price Index (CPI) to proxy inflation and the parallel exchange rate of the naira to the dollar to measure exchange rate, various econometric techniques like the Augmented Dickey Fuller (ADF) test, the Phillips Perron (PP) test and the Box Jenkins O.L.S technique were employed on monthly time series data from 2011:6 to 2013:3. Empirical findings revealed that the stock market does not provide a hedge against inflation in Nigeria. Also, inflation and exchange rates are crucial macroeconomic variables determining the movement of stock returns and the overall performance of the Nigerian Stock Market Index.

Keywords: inflation rate; exchange rate; NSE index; box jenkins (search for similar items in EconPapers)
Date: 2014
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