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2015•RePEc: Research Papers in EconomicsRequires access

Impact of Foreign Exchange Reserves on Nigerian Stock Market

Olayinka Olufisayo Akinlo

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Abstract

This paper investigates the relationship between foreign exchange reserves and stock market development in Nigeria over the period 1981-2011. We use a multivariate framework incorporating an interest rate variable. The results show that a long run relationship exists among exchange rate reserves, interest rates and stock market development. Foreign reserves have a positive effect on stock market growth. Bidirectional causality exists between interest rates and stock market growth. Finally, a bidirectional relationship exists between interest rates and foreign reserves.

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This paper investigates the relationship between foreign exchange reserves and stock market development in Nigeria over the period 1981-2011. We use a multivariate framework incorporating an interest rate variable. The results show that a long run relationship exists among exchange rate reserves, interest rates and stock market development. Foreign reserves have a positive effect on stock market growth. Bidirectional causality exists between interest rates and stock market growth. Finally, a bidirectional relationship exists between interest rates and foreign reserves.

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Available abstract

This paper investigates the relationship between foreign exchange reserves and stock market development in Nigeria over the period 1981-2011. We use a multivariate framework incorporating an interest rate variable. The results show that a long run relationship exists among exchange rate reserves, interest rates and stock market development. Foreign reserves have a positive effect on stock market growth. Bidirectional causality exists between interest rates and stock market growth. Finally, a bidirectional relationship exists between interest rates and foreign reserves.

Key concepts: Market capitalization, Stock market, Economics, Foreign-exchange reserves, Monetary economics, Stock exchange, Primary market, Stock market bubble

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