Stock Market Development and Economic Growth in Nigeria: Market Size Versus Liquidity
This study investigates empirically into the acclaimed positive role played by stock markets in driving growth, with evidence from the Nigerian stock market. Utilizing several econometric techniques, such as unit root test, cointegration test and Gran=ger causality test the study disaggregates stock market development into two components: Stock market size and stock market liquidity. The essence is to know the aspect of stock market development that is the main driver of growth in Nigeria. The findings suggest the dominance of stock market liquidity over market size. While there is a two way causation between stock market liquidity and economic growth with the strength of the causality coming more from stock market liquidity, market size is found to have little or no effect on growth. Equally the results suggest a one way causation between financial deepening and growth with causality flowing from financial depending to economic growth.
Key words: Stock market size; Liquidity; Economic growth; Causality; Nigeria
Arestis, P., Demetriades, P. O., & Luintel. K.B. (2001). Financial Development and Economic Growth: The Role of Stock Markets. Retrieved from Journal of Money, Credit and Banking. http://www.accessmylibrary.com/coms2/summary/0286-10601330.html
Bencivenga, V. R., & Smith, B.D. (1991). Financial Intermediation and Endogenous Growth. Review of Economic Studies, 58(2), 195-209.
Bencivenga, V., Smith, B., & Star, R. (1996). Equity Markets, Transaction Costs and Capital Accumulation. An Illustration. World Bank Economic Review, 10(2), 241-265.
Brasoveanu, L. O., Dragota, V., Catarama, D., & Andreea, S. (2008). Correlation Between Capital Market and Economic Growth in Romania. Journal of Applied Quantitative Methods, 3(1), 15-30.
Choong, C. K., Yusop, Z., Siong, H.L., & Venus, L. K. S. (2005). Financial Development and Economic Growth in Malaysia: The Stock Market Perspective. Retrieved from http://184.108.40.206/eps/mac/papers/0307/0307010.pdf
Claessens, S., Dasgupta, S., & Glen, J. (1993). Stock Price Behaviour in Emerging Stock Markets. Washington, D. C.: The World Bank.
Demirguc-Kunt, A., & Levine, R. (1996). Stock Markets, Corporate Finance and Economic Growth: An Overview. World Bank Economic Review, 10(3), 223-239.
Devereux, M., & Smith, G. (1994). International Risk Sharing and Economic Growth. International Economic Review, 35 (4), 535-550.
Filer, R. K., Hanousek, J., & Campos, N.F. (2003). Do Stock Markets Promote Economic Growth? Vienna: Vinna Stock Exchange.
Gonzalo, J. (1994). Five Alternative Methods of Estimating Long Run Equilibrium Relationship. Journal of Econometrics, 60(1), 203-33.
Greenwood, J., & Jovanovic, B. (1990). Financial Development, Growth and the Distribution of Income. Journal of Political Economy, 8(5), 1076-1107.
Grossman, S., & Stiglitz, J. (1980). On the Impossibility of Informationally Efficient Markets. American Economic Review, 70, 393-403.
Gujarati, D. N. (2005). Basic Econometrics (4th ed.). New Delhi: Tata MacGraw-Hill.
Hall, S. G., & Milne, A. (1994). The Relevance of P-Star Analysis to UK Monetary Policy. Economic Journal, 104(3), 597-604.
Hall, S. G., & Wickens, M. (1993). Causality in Integrated Systems. London Business School Discussion Papers, 60, 27-93.
Haug, A. A. (1996). Test for Cointegration: A Montecarlo Comparison. Journal of Econometrics, 71(1), 89-115.
Herms, N. (1994): Financial Development and Economic Growth: A Survey of the Literature. International Journal of Development Banking, 12(1), 3-22.
Hicks, J. (1969). A Theory of Economic History. Oxford: Clarendon Press.
homstrom, B., & Tirole, J. (1993). Market Liquidity and Performance Monitoring. Journal of Political Economy, 101(4), 678-709.
International Finance Corporation. (1991). Emerging Capital Markets. New York: IFC.
Jensen, M. C., & Murphy, K.J. (1990). Performance Pay and Top Management Incentives. Journal of Political Economy, 98(2), 225-64.
Johansen, S. (1988). Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control, 12(2), 231-254.
Kar, M., & Pentecost, E. J. (2000). Financial Development and Economic Growth in Turkey: Further Evidence on the Causality Issue. Economic Research Paper 27. Department of Economics. Lough Borough University. Retrieved from http://www.econturk.org/muhsinkark.pdf
Kyle, A. (1984). Market Structure, Information, Future Markets and Price Formation. In G. Gary, A. Schmitz, & A. Sarris (Eds.), International Agricultural Trade Advanced Reading in Price Formation. Market Structure and Price Instability (pp. 105-121). Boulder: Westy.
Levine, R. (1991). Stock Markets, Growth and Tax Policy. Journal of Finance, 46(4), 1445-1465.
Levine, R. (1997). Financial Development and Economic Growth. Views and Agenda. Journal of Economic Literature, 35, 688-726
Levine, R., & Zervos, S. (1998). Stock Markets, Banks and Economic Growth. American Economic Review, 88, 537-558.
Lucas, R. E. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1), 3-42.
McKinnon, R. (1973). Money and Capital in Economic Development. Washington D. C.: The Brookings Institutions.
Mohtadi, H., & Agarwal, S. (2001). Stock Market Development and Economic Growth: Evidence from Developing Countries. Retrieved from http:// www. UWM .edu / mohadi /PAL-4-01.pdf
Nyong, M. O. (1996). Capital Market Development and Long-run Economic Growth: Theory Evidence and Policy Proposal for Another Development Strategy. In J. E. U. Ndebbio, & U. Essia (Eds.), Nigeria Another Development Strategy (pp. 129-155). Calabar: But-Bass Educational Book.
Obstefeld, M. (1994). Risk Taking, Global Diversification and Growth. American Economic Review, 84(5), 1310-1329.
Ogun, T. P., & Iyoha, F.O. (2005). The Nigerian Stock Market and Future Economic Activity: Does Deregulation of the Financial Market make any Difference? Union Digest, 9(1 & 2), 31-47.
Olubusoye, O.E., & Oyaromade, R. (2009). Modeling the Dynamics of Inflation in Nigeria. In A. Adenikinju, D. Busari & S. Olofin (Eds.), Applied Econometrics and Macroeconometrics Modeling in Nigeria (pp. 161-174). Ibadan, Ibadan University Press.
Robinson, J. (1952). The Generalization of the General Theory. In J. Robinson (Ed.), The Rate of Interest and Other Essays (pp. 86-87). London: Macmillan.
Saint-Paul, G. (1992). Technological Choice, Financial Markets and Economic Development. European Economic Review, 36(4), 763-81.
Schumpeter, J. (1912). The Theory of Economic Development. Cambridge, M.A.: Harvard University Press.
Singh, A. (1997). Stock Markets, Financial Liberalization and Economic Development, Economic Journal, 107(4), 771-82.
Yartey, C. A., & Adjasi, C. K. (2007). Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges. International Monetary Fund Working Paper, 22, 1-15.
- There are currently no refbacks.
How to do online submission to another Journal?
If you have already registered in Journal A, then how can you submit another article to Journal B? It takes two steps to make it happen:
1. Register yourself in Journal B as an Author
Find the journal you want to submit to in CATEGORIES, click on “VIEW JOURNAL”, “Online Submissions”, “GO TO LOGIN” and “Edit My Profile”. Check “Author” on the “Edit Profile” page, then “Save”.
Go to “User Home”, and click on “Author” under the name of Journal B. You may start a New Submission by clicking on “CLICK HERE”.
We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases: firstname.lastname@example.org; email@example.com; firstname.lastname@example.org
Copyright © Canadian Academy of Oriental and Occidental Culture
Address: 730, 77e AV, Laval, Quebec, H7V 4A8, Canada
Telephone: 1-514-558 6138