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Impact of Capital Market Development on the Growth of the Nigerian Economy

Okoye, Lawrence U. and Modebe, Nwanneka J. and Taiwo, J.N. and Okorie, Uchechukwu Emenas (2016) Impact of Capital Market Development on the Growth of the Nigerian Economy. Research Journal of Financial Sustainability Reporting, 1 (1).

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Abstract

This paper investigates the relationship between capital market development and economic growth using data on GDP (proxy for economic growth), market capitalization ratio, value traded ratio and stock market turnover ratio (proxies for capital market development) over the period 1981-2014. Employing the econometric methodology of the vector error correction model, the study shows that in the short-run, market capitalization ratio and turnover ratio have significant negative effect on aggregate national output (GDP). The study also shows positive effect of value traded ratio as well as negative effect of inflation rate on GDP though not significant. The long-run estimate shows that all the exogenous variables have significant negative impact on GDP and that changes in market capitalization ratio, value traded ratio and turnover ratio produce more than proportionate changes in GDP. With an adjustment speed of about 91.12 per cent, the model presents an inherent capacity to overcome short-run disequilibrium. The Granger causality test shows evidence of causal impact of market capitalization ratio, value traded ratio and turnover ratio on aggregate national output. The study further shows uni-directional causality from GDP to inflation. The paper established therefore that stock market development constitutes a significant determinant of economic growth in Nigeria.

Item Type: Article
Uncontrolled Keywords: Capital Market Development, Economic Growth, Market Capitalization, Value Traded, Market Turnover
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Divisions: Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User: Mrs Patricia Nwokealisi
Date Deposited: 14 Jun 2017 09:40
Last Modified: 29 Jun 2017 15:12
URI: http://eprints.covenantuniversity.edu.ng/id/eprint/8196

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