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Monetary Policy and the Stock Market: Empirical Evidence from Nigeria - Research Proposal Example
Finance & Accounting
Pages 4 (1004 words)
Monetary Policy and the Stock Market: Empirical Evidence from Nigeria Contents Abstract 3 Preliminary introduction 3 Preliminary literature review and motivation 4 Preliminary data requirement 6 Conclusion 6 References 7 Abstract A two staged least square method is suitable to judge the impact of monetary policies on the Nigerian stock market…
The major findings include the impact of long run monetary policy on the stock market returns of Nigeria. The stock market returns get reduced because of high rate of Treasury Bill. This provides the evidence that efforts in monetary policy contributes in slowing down the economy. The returns in stock market witness a positive effect from current interest rate and interest rate lagged by one period. The sign of lagged error correction is negative. The feature of the variance decomposition results is that the sources of fluctuations of returns are largely due to shocks in stock market as well as interest rate. Thus, innovations of interest rate can act as the estimator in the returns in stock market in Nigeria. Preliminary introduction The monetary policy of a country controls the money supply by the process of monetary policy. The authorities target a rate of interest with the aim of providing stability and growth in the economy. The objectives of the authorities include relatively stable prices and lower rate of unemployment. When a monetary policy increases the supply of money in the economy, it is said to be expansionary and when the same policy leads to contraction of money supply, accordingly, it is said to be contractionary. ...
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