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Stock returns-inflation nexus in Africa during tranquil and crisis periods: New evidence


  • Afees A. Salisu
  • Samuel F. Onipede
  • Wasiu Adekunle

    () (Ton Duc Thang University)


In this paper, we investigate the stock returns-inflation nexus covering the four major stock exchanges in Africa. We employ both the heterogenous and quantile panel regressions due to the possibility of variation in the slope parameters across countries and overtime. This assumption of heterogeneity is further validated by the Pesaran (2007) and Pesaran et al. (2013) tests involving cross-section averages. Thereafter, the analyses are singly conducted for both the pre- and post-global financial crisis (GFC) periods. Our findings suggest contrasting directions in the stock return-inflation nexus between the pre-GFC and post- GFC periods implying that the nexus is episodic regardless of the composition of countries. Similar evidence is obtained for the panel quantile regression as the relationship between stock returns and inflation at different quantiles follows a descending order from lower quantile to upper quantile for the pre-GFC while the converse is noticed for the post-GFC.

Suggested Citation

  • Afees A. Salisu & Samuel F. Onipede & Wasiu Adekunle, 2019. "Stock returns-inflation nexus in Africa during tranquil and crisis periods: New evidence," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 9(1), pages 22-31.
  • Handle: RePEc:afj:journ3:v:9:y:2019:i:1:p:22-31

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    Stock returns; Inflation; Africa; Heterogenous panels; Panel quantile regressions;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G01 - Financial Economics - - General - - - Financial Crises


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