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Assessment of the Impact of Fiscal Policy Operations on Stock Price Performance: Empirical Evidence from Nigeria

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  • Onyemachi Maxwell Ogbulu
  • Lezaasi Lenee Torbira
  • Chizoba Lynda Umezinwa

Abstract

This paper examines the relationship between Government fiscal policy measures and stock prices in Nigeria during the period 1985 ¨C 2012. Employing OLS, co-integration, error correction mechanism (ECM), Granger Causality and impulse response and variance decomposition techniques on fiscal policy ¨C stock prices model patterned after a multivariate regression, the study found a significant and negative impact of Public expenditure on stock prices, while Government Domestic Debt Outstanding exerts a significant and positive influence on stock prices. The study also reports a significant and positive relationship between Non-Oil Revenue and stock prices while the two-period and three-period lagged values of broad money supply have significant relationship with stock prices. The Granger causality tests reveal that Stock prices lead changes in Public Expenditure, Domestic Debt and Money Supply respectively while Non-Oil Revenue leads changes in stock prices. The results of both the IRF and VDC analysis reveal that own shocks represent the dominant source of variation in the forecast errors of the variables. The paper therefore recommends that appropriate fiscal policies should be designed and implemented on account of the significant and profound impact of fiscal policies on stock market prices.

Suggested Citation

  • Onyemachi Maxwell Ogbulu & Lezaasi Lenee Torbira & Chizoba Lynda Umezinwa, 2015. "Assessment of the Impact of Fiscal Policy Operations on Stock Price Performance: Empirical Evidence from Nigeria," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(2), pages 190-202, April.
    • Handle: RePEc:jfr:ijfr11:v:6:y:2015:i:2:p:190-202
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    References listed on IDEAS

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    Cited by:

    1. Mohammed Ibrahim Danlami & Sanusi Yakubu Muhammad, 2023. "Fiscal Policy and Stock Market Efficiency in Nigeria: Evidence from SVAR Framework," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(12), pages 89-99, December.

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