Dynamic Effect of Exchange Rate Gap Shocks on Stock Market Deepening: Evidence from Nigeria-Reference-Cited by-同舟云学术

Dynamic Effect of Exchange Rate Gap Shocks on Stock Market Deepening: Evidence from Nigeria

Published:2023 Issue:1 Volume:14 Page:93-119
ISSN:2476-8472
Container-title:Central Bank of Nigeria Journal of Applied Statistics
language:en
Short-container-title:CBN-JAS

Author:

Arikewuyo Kareem¹

Affiliation:

1. Department of Business Administration, Southwestern University, Okun - Owa, Ogun State, Nigeria

Abstract

The study examines the exchange rate gap shock–stock market deepening nexus in Nigeria using the structural VAR-X (SVAR-X) technique for the period 1986Q1 to 2018Q4. Findings reveal that exchange rate gap shock has a negative but statistically not significant effect on stock market deepening in Nigeria. It was also found that exchange rate passed–through interest rate from second to thirteen quarter, and further through financial openness whose effect, like exchange rate gap, was negative. This implies that exchange rate gap is significantly and negatively related to interest rate and financial openness in Nigeria. It is therefore recommended that the monetary authority should keep constant tab on the gap between official and parallel market exchange rates as its widening can have a damaging effect on stock market deepening. In addition, there is need to establish hedging instrument market to increase resilience of the stock market and improve stock market deepening in Nigeria.

Publisher

Central Bank of Nigeria

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