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Re-examining the relationship between monetary policy and stock market prices in Nigeria

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  • Umar Isah, Yahaya

Abstract

The study investigates effect of monetary policy variables on performance of prices of stock in Nigeria. The study covered the period 1986 –2022. Data were generated from the Central Bank of Nigeria Statistical Bulletin, 2023 edition. The method of data analyses used are ARDL technique as All Share Index (ASI) was used to measure stock price, while explanatory variables included inflation rate (INF), Broad money supply (M2), Monetary Policy Rate (MPR) and Real exchange rate (REXR). The ARDL bound test result indicates a long run association between monetary policy variables and stock prices in Nigeria. The long run estimates shows that only real exchange rate has significant effect on stock prices further findings reveal that monetary policy rate has significant impact on prices in stock market. The findings inform the conclusion that most monetary policy variables do not create necessary directions in market prices in Nigeria and recommends that the Nigerian stock market cannot yet be regarded as good policy monetary policy channel in Nigeria as the market is yet to absorb monetary policy impulses to an extent that monetary policy tools and instruments may significantly influence its direction and development.

Suggested Citation

  • Umar Isah, Yahaya, 2024. "Re-examining the relationship between monetary policy and stock market prices in Nigeria," MPRA Paper 122083, University Library of Munich, Germany, revised 2024.
    • Handle: RePEc:pra:mprapa:122083
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    File URL: https://mpra.ub.uni-muenchen.de/122083/1/MPRA_paper_122083.pdf
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    References listed on IDEAS

    as
    1. Thorbecke, Willem, 1997. "On Stock Market Returns and Monetary Policy," Journal of Finance, American Finance Association, vol. 52(2), pages 635-654, June.
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    More about this item

    Keywords

    Monetary policy; stock market prices; Exchange rate; Money supply; ARDL;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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