Open AccessStock Market Reaction to Monetary Policy Modifications: Evidence from an Emergent Market
Author(s) -
Cordelia Onyinyechi Omodero,
D. T. Adetula,
Kingsley Aderemi Adeyemo
Publication year - 2021
Publication title -
academic journal of interdisciplinary studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.148
H-Index - 5
eISSN - 2281-3993
pISSN - 2281-4612
DOI - 10.36941/ajis-2021-0064
Subject(s) - stock market , monetary policy , interest rate , monetary economics , economics , stock market index , stock exchange , stock market crash , exchange rate , money supply , business , finance , paleontology , horse , biology
This study evaluates the stock market reaction to monetary policy modifications in an emerging market using Nigeria as a case study. Due to the crucial role the stock market plays in the global economy and finance, it becomes an attraction for most researchers and policymakers who try to find a basis for its smooth operation. This study uses data that cover a period from 1998 to 2018 to establish what the position is in recent times empirically. The data are collected on all share index, money supply, interest rate and exchange rate. The multiple regression results provide evidence that the money supply has a significant favourable influence on the all-share index. In contrast, the interest rate has an immaterial harmful effect on the stock market output. However, the result indicates that the exchange rate affects the stock market performance negatively, but the effect is insignificant. Based on these findings, the study suggests pilot test running of all monetary policy amendments by the monetary authority in the country before full implementation. The government should encourage the CBN to cut down on interest rate and avoid all policies that will lead to a crash in the Nigerian stock market.
Received: 16 October 2020 / Accepted: 12 February 2021 / Published: 10 May 2021