INVESTIGATING THE RELATIONSHIP BETWEEN STOCK MARKET DEVELOPMENT AND ECONOMIC GROWTH IN NIGERIA
Abstract
Growth theories concede that capital markets have a positive influence on economic growth. However, empirical evidence is divided on the possible impact of stock market development on economic growth in various economies including Nigeria. This study seeks to ascertain the true nature of the relationship between stock market development and economic growth in Nigeria using annual time series data spanning from 1981 to 2021. The study employed the Autoregressive distributed Lag (ARDL)-error correction modelling technique. Stock market development was captured using market capitalization and all shares index as proxies. Other related explanatory control variables theoretically acclaimed to be drivers of growth such as investment and Bank credit to the private sector were added to prevent omitted variable bias. From the result, market capitalization was not significant while All-share Index (ASI) was significant. Bank credit to the private sector was also significant, suggesting that banks are more active drivers of growth. The study recommended among othersthat effective policy frameworks towards the development of the Nigerian stock market should be a policy focus to substantially enhance the size, depth and liquidity of the Nigerian stock market.
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