Capital Market and Fiscal Policy Shocks in Nigeria
Journal of Finance and Accounting
Volume 8, Issue 3, May 2020, Pages: 125-135
Received: May 7, 2020; Accepted: May 25, 2020; Published: Jun. 3, 2020
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Ejem Chukwu Agwu, Department of Banking and Finance, Abia State University, Uturu, Nigeria
Ogbonna Udochukwu Godfrey, Department of Management Science, Rhema University, Aba, Nigeria
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This study dissected fiscal policy from monetary policy to unravel its impact on Capital market performance in Nigeria and how capital market responds to fiscal policy measures. The empirical analysis came up with the following major findings; the Error Correction Model revealed that market Capitalization as a performance index in this study is autoregressive, implying that previous market capitalization can predict investors’ perception of the market in the futures, also the model’s results show that recurrent expenditure and Non-Oil Revenue have negative and significant relationship with capital market performance in Nigeria. And Domestic debt was found to have a positive and significant relationship with capital market performance, validating the Keynes’s postulations reviewed in this study that government should adopt fiscal policy through deficit financing to put an end to further economic depression and related issues. Pairwise Granger Causality Test Results found bi-directional effect between domestic debt and market capitalization, implying that the duo drive each other or have feedback effect. Also VEC Granger Causality/Block Exogeneity Wald Test revealed that fiscal policy variables jointly cause capital market performance in the long run. The impulse responses revealed that shock market capitalization (own shock) exerted huge influence in the cause of variations on capital market performance followed by shocks from government expenditures. It is in light of the findings the researchers among others; advise the regulatory authorities in Nigeria that government revenues and expenditure be adequately orchestrated as main drivers to correct disequilibria in the Nigeria.
Fiscal Policy, Market Capitalization, Impulse Responses, Nigeria
To cite this article
Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey, Capital Market and Fiscal Policy Shocks in Nigeria, Journal of Finance and Accounting. Vol. 8, No. 3, 2020, pp. 125-135. doi: 10.11648/j.jfa.20200803.13
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