Macroeconomic indicators and capital market performance: Are the links sustainable?

This paper examines the long-run impact of macroeconomic indicators such as interest rate, foreign capital flows, exchange rate, GDP growth, inflation and trade on stock market performance (market capitalization) in Nigeria. Using data drawn from the World Development Indicators (WDI, 2018) and the...

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Autores principales:	Felicia O. Olokoyo, Oyakhilome W. Ibhagui, Abiola Babajide
Formato:	article
Lenguaje:	EN
Publicado:	Taylor & Francis Group 2020
Materias:	macroeconomic variables capital market performance long-run relationship Business HF5001-6182 Management. Industrial management HD28-70
Acceso en línea:	https://doaj.org/article/b2ca29ec2e54402a8a00df3e791cc181
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spelling	oai:doaj.org-article:b2ca29ec2e54402a8a00df3e791cc1812021-12-02T14:41:30ZMacroeconomic indicators and capital market performance: Are the links sustainable?2331-197510.1080/23311975.2020.1792258https://doaj.org/article/b2ca29ec2e54402a8a00df3e791cc1812020-01-01T00:00:00Zhttp://dx.doi.org/10.1080/23311975.2020.1792258https://doaj.org/toc/2331-1975This paper examines the long-run impact of macroeconomic indicators such as interest rate, foreign capital flows, exchange rate, GDP growth, inflation and trade on stock market performance (market capitalization) in Nigeria. Using data drawn from the World Development Indicators (WDI, 2018) and the Central Bank of Nigeria (CBN) Statistical Bulletin 2018, the study employed the VECM analysis. The results found suggest that 1) macroeconomic variables and stock market performance are cointegrated and thus linked in the long run; 2) interest rate, inflation and trade bear a negative relationship with stock market performance; and 3) exchange rate, GDP growth rate and foreign capital flows are positively related to stock market performance. Our results show that when there is a deviation from the long-run relation between stock market performance and mafcroeconomic fundamentals, it is primarily the stock market, interest rate and foreign capital flows that adjust to ensure that the long-run link is restored, whereas exchange rate, GDP growth, inflation and trade are weakly exogenous. We estimate that any disequilibrium emanating from interest rate is more than fully corrected in one year, in the oscillating convergence sense, while 29% and 5% of the disequilibrium from stock market and foreign capital flows are corrected in one year. A policy recommendation that emerges from the study is the need to strengthen policies aimed at improving the country’s macroeconomic environment. Specifically, this will involve policies aimed at lowering interest rate, increasing foreign capital flows and improving the country’s terms of trade.Felicia O. OlokoyoOyakhilome W. IbhaguiAbiola BabajideTaylor & Francis Grouparticlemacroeconomic variablescapital market performancelong-run relationshipBusinessHF5001-6182Management. Industrial managementHD28-70ENCogent Business & Management, Vol 7, Iss 1 (2020)
institution	DOAJ
collection	DOAJ
language	EN
topic	macroeconomic variables capital market performance long-run relationship Business HF5001-6182 Management. Industrial management HD28-70
spellingShingle	macroeconomic variables capital market performance long-run relationship Business HF5001-6182 Management. Industrial management HD28-70 Felicia O. Olokoyo Oyakhilome W. Ibhagui Abiola Babajide Macroeconomic indicators and capital market performance: Are the links sustainable?
description	This paper examines the long-run impact of macroeconomic indicators such as interest rate, foreign capital flows, exchange rate, GDP growth, inflation and trade on stock market performance (market capitalization) in Nigeria. Using data drawn from the World Development Indicators (WDI, 2018) and the Central Bank of Nigeria (CBN) Statistical Bulletin 2018, the study employed the VECM analysis. The results found suggest that 1) macroeconomic variables and stock market performance are cointegrated and thus linked in the long run; 2) interest rate, inflation and trade bear a negative relationship with stock market performance; and 3) exchange rate, GDP growth rate and foreign capital flows are positively related to stock market performance. Our results show that when there is a deviation from the long-run relation between stock market performance and mafcroeconomic fundamentals, it is primarily the stock market, interest rate and foreign capital flows that adjust to ensure that the long-run link is restored, whereas exchange rate, GDP growth, inflation and trade are weakly exogenous. We estimate that any disequilibrium emanating from interest rate is more than fully corrected in one year, in the oscillating convergence sense, while 29% and 5% of the disequilibrium from stock market and foreign capital flows are corrected in one year. A policy recommendation that emerges from the study is the need to strengthen policies aimed at improving the country’s macroeconomic environment. Specifically, this will involve policies aimed at lowering interest rate, increasing foreign capital flows and improving the country’s terms of trade.
format	article
author	Felicia O. Olokoyo Oyakhilome W. Ibhagui Abiola Babajide
author_facet	Felicia O. Olokoyo Oyakhilome W. Ibhagui Abiola Babajide
author_sort	Felicia O. Olokoyo
title	Macroeconomic indicators and capital market performance: Are the links sustainable?
title_short	Macroeconomic indicators and capital market performance: Are the links sustainable?
title_full	Macroeconomic indicators and capital market performance: Are the links sustainable?
title_fullStr	Macroeconomic indicators and capital market performance: Are the links sustainable?
title_full_unstemmed	Macroeconomic indicators and capital market performance: Are the links sustainable?
title_sort	macroeconomic indicators and capital market performance: are the links sustainable?
publisher	Taylor & Francis Group
publishDate	2020
url	https://doaj.org/article/b2ca29ec2e54402a8a00df3e791cc181
work_keys_str_mv	AT feliciaoolokoyo macroeconomicindicatorsandcapitalmarketperformancearethelinkssustainable AT oyakhilomewibhagui macroeconomicindicatorsandcapitalmarketperformancearethelinkssustainable AT abiolababajide macroeconomicindicatorsandcapitalmarketperformancearethelinkssustainable
_version_	1718389892508024832

Macroeconomic indicators and capital market performance: Are the links sustainable?

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