Impact of Monetary Policy on Value of Stock Traded: Short Run and Long Run Evidence from Nigerian Stock Exchange (1987- 2017)

Main Article Content

Chinedu Maurice Umezurike
Amalachukwu Chijindu Ananwude

Abstract

This study examined the effect of monetary policy on value of stock traded in Nigerian Stock Exchange. Specifically, we ascertained the effect of monetary policy rate, liquidity ratio and loan to deposit ratio on value of stock traded using the Autoregressive Distribute Lag (ARDL) based on annual data from 1986 to 2017. Our findings showed that monetary policy rate, liquidity ratio and loan to deposit ratio have no significant effect on value of stock traded. Monetary policy rate maintained a negative relationship with value of stock traded, while liquidity ratio and loan to deposit ratio positively correlated with value of stock traded. We are vehemently of the view that expansionary monetary policy that guarantees adequate liquidity in the economy should be pursued vigorously by the Central Bank of Nigeria. Adequate level of liquidity offers firms’ in the stock market better access to financial resources which will increase their revenue and thus appreciation in their stocks trading.

Keywords:
Monetary policy, stock market performance

Article Details

How to Cite
Umezurike, C., & Ananwude, A. (2019). Impact of Monetary Policy on Value of Stock Traded: Short Run and Long Run Evidence from Nigerian Stock Exchange (1987- 2017). Asian Journal of Advanced Research and Reports, 5(4), 1-9. Retrieved from http://journalajarr.com/index.php/AJARR/article/view/30136
Section
Original Research Article

References

Smith GI. Investments. Illinois & London: Glenview; 1990.

Okpara GC. Monetary Policy and Stock Market returns: Evidence from Nigeria. Classification Journal of Economics. 2010;1(1):13-21.

Amadi SN, Odubo TB. Macro-economic variables and Stock Prices: Causality Analysis. The Nigeria Journal of Economic and Management Studies. 2002;4(1&2):29-41.

Goodhart C, Hofman B. Financial variables and the conduct of Monetary Policy Sveriges Risk Bank working Paper No. 12; 2000.

Napolitano O. Is the impact of ECB monetary policy on EMU stock market return asymmetric?; 2006.
Available at: www.ssrn.com

Abaenewe ZC, Ndugbu MO. Analysis of the effect of monetary policy development on equity prices in Nigeria. West African Journal of Industrial and Academic Research. 2012;5(1):1-13.

Anyanwu JC. Monetary Economics: Theory, policy and institutions. Hybrid Publisher Ltd, Onitsha, Nigeria; 1993.

Wrightsman D. An introduction to monetary theory and policy. The Free Press, New York; 1976.

Nwaru NM. Macro economic theory. Kricel Publishers, Owerri; 2002.

Lindner A, Fischer C, Felix A, Scherer V, Warkentin A. Market efficiency theory investment and valuation of firms. Universidad de Huelva; 2010.

Osamwonnyi IO. Forecasting as a tool for securities analysis. A paper presented at a three day workshop on introduction of Securities and Exchange Commission, Lagos; 2003.

Aziza OF. The effects of monetary policy on stock market performance: a cross-country analysis; 2010.
Available at: http/www.ssrn.com

Terfa WA. Stock Market reaction to selected Macroeconomic variables in the Nigeria Economy. CBN Journal of Applied Statistic. 2009;2(1):15-28.

Nwakoby CIN, Alajekwu UB. Effect of monetary policy on Nigerian stock market performance. International Journal of Scientific Research and Management. 2016;4(9):4530-4442.

Muktadir-Al-Mukit D, Shafiullah AZM. Impact of monetary policy on post crashed stock market performance: Evidence from Dhaka stock exchange. Journal of Business & Economics. 2012; 4(1):106-123.

Mohamadpour B, Behravan N, Espahbodi S, Karimi R. An empirical study of relationship between monetary policy and stock market performance in Malaysia. Australian Journal of Basic and Applied Sciences. 2012;6(12):142-148.

Chen X, Xie X. How responsive is China’s stock market to the monetary policies. Proceedings of the International Multi Conference of Engineers and Computer Scientists. 2016; 3(9):16–18.

Hsing Y. Effects of fiscal policy and monetary policy on the stock market in Poland. Economies. 2013;1:19-25.