International Journal of Finance and Commerce

International Journal of Finance and Commerce


International Journal of Finance and Commerce
International Journal of Finance and Commerce
2022, Vol. 4, Issue 1
Monetary polcy dynamics and stock returns oscillation in Nigeria: Further evidence from cointegrated var

Ejem Chukwu Agwu, Edori Iniviei Simeon

This study further investigated the nexus between monetary policy instruments and stock returns in Nigeria. This is to ascertain the controversial assertion that monetary policy in Nigeria is ineffective as result of no instrument autonomy by Central Bank Nigeria (CBN) and goal determination being heavily interrupted by the political considerations conveyed through the Ministry of Finance, hence stock market remains underdeveloped. To achieve this, the study employed granger causality mechanism and unrestricted Vector Autoregressive method among other macrofinametric tools with a historical data sourced from the apex bank of Nigeria statistical bulletin between the periods 1985 to 2019.The monetary policy instruments employed are; monetary policy rate, cash reserve ratio and liquidity ratio while all share indexes are proxied for stock returns. Empirical results found that stock returns in Nigeria does not respond to monetary policy instrument, rather monetary policy instruments respond to changes in stock returns. It was also disclosed that stock returns reinforces itself, meaning that past performances judged with stock returns predict the future performances of the stock market. The results of the estimates found that all the variables of monetary policy insignificantly impact the stock returns. The salient feature of the variance decomposition results is that the predominant sources of stock return fluctuations are due largely to own shock and little from monetary policy. It was also found that in the long run, monetary policy brings about long term positive and negative shocks in stock returns. As such, the study recommended among others that the Central Bank of Nigeria should be made autonomous to enable the apex body independently regulates and supervises the entire financial system, thereby formulates monetary policies that could among others objectives enhance the performance of the stock market.
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How to cite this article:
Ejem Chukwu Agwu, Edori Iniviei Simeon. Monetary polcy dynamics and stock returns oscillation in Nigeria: Further evidence from cointegrated var. International Journal of Finance and Commerce, Volume 4, Issue 1, 2022, Pages 1-3
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