Monetary Policy and the Performance of Nigeria Capital Market: A Time Variant Analysis (Published)
This study examined the relationship between monetary policy and the performance of the Nigerian capital market using annual time series data sourced from the Central Bank of Nigeria Statistical Bulletin. The objective was to examine the long and short run relationship that exists between monetary policy variables and the performance of Nigerian capital market. Market capitalization and market turnover was modeled as the function of interest rate, exchange rate, monetary aggregates, monetary policy rate and treasury bill rate. The study applied the Ordinary Least Square (OLS) regression technique and causality, unit root, cointegration, vector error correction estimates. Findings revealed that interest rate, exchange rate monetary aggregate and monetary policy rate have positive and significant relationship with market capitalization but treasury bill rate have negative and significant relationship with market capitalization. Monetary policy rate, monetary aggregate and exchange rate have positive relationship with market turnover while Treasury bill rate and interest rate have negative and significant relationship with market turnover. The unit root test found the variables stationary at first difference, the cointergration test validates the presence of long run relationship, the granger causality test proved unidirectional causality while the vector error correction estimates justified adequate speed of adjustment. The study concludes that monetary policy has significant relationship with performance of Nigeria capital market. We recommend that the monetary authorities should ensure effect monetary policy transmission mechanism that will enhance the performance of the capital market.
Keywords: Capital market, Exchange Rate, Monetary Policy, Time Series Monetary Policy Rate
External Debt and Economic Growth: The Nigeria Experience (Published)
This research work was aimed at ascertaining the impact of external debt on economic growth in Nigeria. Ex-post facto research design was adopted for the study. While data on Gross Domestic Product (GDP), External Debt Stock and External Debt Service Payment were obtained from World Bank International Debt Statistics, Exchange Rate data were collected from Central Bank of Nigeria Statistical Bulletin, 2013. The period of study was 1980-2013. Model was formulated and data were analyzed using Ordinary Least Square. Diagnostic tests were conducted using Augmented Dick Fuller Unit Root Test, Co-integration and Error Correction Model. The independent variable was GDP, while the explanatory variables were External Debt Stock, External Debt Service Payment and Exchange Rate. We discovered that External Debt had a positive relationship with Gross Domestic Product at short run, but a negative relationship at long run. Also, while External Debt Service Payment had negative relationship with Gross Domestic Product, Exchange Rate had a positive relationship with it. The paper concluded that exchange rate fluctuation had positive impact on the Nigerian economy while external debt stock and debt service payment had negative impact on the same economy. The study recommended amongst others, that Debt Management Office should set mechanism in motion to ensure that loans were utilized for purposes for which they were acquired as well as set a ceiling for borrowing for states and federal governments based on well-defined criteria.
Keywords: Debt Stock, Exchange Rate, External Debt, External Debt Service Payment, Gross Domestic Product
APPLICATION OF EXTREME VALUE THEORY FOR EXTREME QUANTILES ESTIMATION IN RWANDA EXCHANGE RATE (Review Completed - Accepted)
Estimating the probability of rare and extreme events is a crucial issue in the risk estimation of exchange rate returns. Extreme Value Theory (EVT) is a well developed theory in the field of probability that studies the distribution of extreme realizations of a given distribution function, or of a stochastic process, satisfying certain assumptions. This work has fitted the Generalized Pareto Distribution (GPD) proposed by EVT to the excesses returns over the threshold to estimate quantiles in the tails of independent and identically distributed residuals and asymptotic properties of the estimators were given. The results were applied to estimate extreme quantiles in the Rwanda exchange rate process.
Keywords: Confidence intervals, EVT approach, Exchange Rate, Generalized Pareto Distribution, Maximum Likelihood Estimation, Quantiles estimation
Foreign Exchange Management and the Nigerian Economic Growth (1960 – 2012). (Review Completed - Accepted)
The study examined foreign exchange management and the Nigeria economic growth from 1970 to 2012. The scope of the study is limited to Nigeria. The empirical model for the study was based on the conclusion of our theoretical framework. The data used for this study were majorly sourced from the Central Bank of Nigeria Bulletin (2011). The ordinary least square estimation techniques within the error correction model (ECM) framework are employed in the study. The choice of the ECM is to enable it account for the explanatory potent of the regressions in both the short run and long run as well as ascertaining the dynamics of attaining long run equilibrium, an issue which is the key to studies related to macroeconomics variables one of which is the exchange rate. The Johansen-Joselius Co- Integration test is employed in this study, to test for the presence of a long run relationship between the dependent variable (exchange rate) and the independent variables. The result of the co-integration as revealed show that trace statistics and maximum Eigen values are greater than the critical values at 5% level of significance. It shows that there is a unique long run relationship among Y, EXCR, EXPT,IMP, INF and FDI. The result further shows that the explanatory variables explain and account for about 99% of variation in economics growth peroxide by GDP, which is an evidence of a good fit of the model. The f-statistics shows that the explanatory variables are jointly significant in explaining economic growth (dependent variable). The result above shows export and foreign direct investment are statistically significant in determining economic growth which considered at 5% and 10% respectively. However, exchange rate import and inflation are found to be statistically non-significant. It is against this back drop of the above findings, that it is recommended that effort be made to increase the consumption of made in Nigeria goods, which includes the usage of raw material that can be sourced locally by Nigerian industries in order to increase foreign exchange earnings. The implication of this is that local industries should be encouraged to look inward for their raw material. Having uncovered from the study that the nexus between economic growth and foreign exchange management being a short run relationship, it is necessary that the foreign exchange management policy initiatives be made to satisfy the shorts–run behavioral expectations of the variables used in uncovering this fact
Keywords: Error Correction Model, Exchange Rate, Foreign Exchange Market, economic growth
DOES INFLATION WEAKEN ECONOMIC GROWTH? EVIDENCE FROM NIGERIA (Published)
The study aims at evaluating the link between inflationary rate and economic growth in Nigeria. It also examines the nature and form of association between inflationary rate and exchange rate as well as interest rates from 1979 t0 2010.Ordinary least squares approach in the form of multiple regression was adopted in examining the relationship among the variables while the causalities were evaluated using Granger Causality model. It is pertinent to check whether the short run relationships would be sustained in the long run. To achieve this, Johansen and Juselius cointegration technique was adopted while the variables were adjusted for stationarity using the Augmented Dickey- Fuller (ADF) tests for unit root. It was found that inflationary rate is negatively related with real gross domestic product while exchange rates and interest rates are positively related with inflationary rate though not to a very significant extent. This is sustainable even in the long run and the implication is that when inflationary rate is rising, it affects the economy negatively as growth is dampened. On causality, at both lag 2 and lag 4, the study reveals that there is no causality between inflationary rate and real gross domestic product. However, at lag 2, there is a unidirectional causality running from inflationary rate to interest rate and also a unidirectional causality running from interest rate to real gross domestic product. At lag 4, there is a unidirectional causality running from interest rate to inflationary rate and from interest rate to exchange rate and also a unidirectional causality running from exchange rate to real gross domestic product. Consequently, efforts should be geared towards keeping inflationary rate at a single digit level to enhance the growth and development of Nigeria economy and to ensure that macroeconomic activities are kept alive
Keywords: Cointegration, Exchange Rate, GDP, Granger, Inflation Rate, Interest Rate