IDEAS home Printed from https://ideas.repec.org/a/bba/j00007/v3y2024i1p52-67d294.html

Nexus Between Asset Class Volatility and the Output Gap in Nigeria: A Bayesian Var Approach

Author

Listed:
  • richard umeokwobi

    (Central Bank of Nigeria, Nigeria)

  • Abayomi Awujola

    (Bingham University, Nasarawa State, Nigeria)

  • Emeka Nkoro

    (University of Port-Harcourt, Nigeria)

  • Marvelous Aigbedion

    (Bingham University, Nasarawa State, Nigeria)

Abstract

Excessive volatility in financial markets can disrupt economic activity, affect investor and consumer confidence, and potentially lead to financial crises in an economy. Due to this backdrop, this study examined the link between asset class volatility and the output gap in Nigeria. The asset classes were categorized into stock, crude, gold, and bitcoin. The study adopted the GARCH and Bayesian VAR approach and found that all share index has an initial negative impulse with output gap while other asset classes have a positive impulse on output gap. The outcome of this study revealed to both policymakers and economists the potential risks and vulnerabilities of asset class volatility in the economy. Based on this result, recommendations are made amongst which is the strengthening of the Nigerian stock market to help with the inflationary pressures this is because the Nigerian stock market hurt the output gap also, the government should prioritize investing in crude, gold, and bitcoin to push the actual output to full capacity, which brings about employment.

Suggested Citation

  • richard umeokwobi & Abayomi Awujola & Emeka Nkoro & Marvelous Aigbedion, 2024. "Nexus Between Asset Class Volatility and the Output Gap in Nigeria: A Bayesian Var Approach," Financial Economics Letters, Anser Press, vol. 3(1), pages 52-67, January.
    • Handle: RePEc:bba:j00007:v:3:y:2024:i:1:p:52-67:d:294
    as

    Download full text from publisher

    File URL: https://www.anserpress.org/journal/fel/3/1/25/pdf
    Download Restriction: no
    File URL: https://www.anserpress.org/journal/fel/3/1/25
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Le, Lan-TN & Yarovaya, Larisa & Nasir, Muhammad Ali, 2021. "Did COVID-19 change spillover patterns between Fintech and other asset classes?," Research in International Business and Finance, Elsevier, vol. 58(C).
    2. Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
    3. Mensi, Walid & Sensoy, Ahmet & Vo, Xuan Vinh & Kang, Sang Hoon, 2022. "Pricing efficiency and asymmetric multifractality of major asset classes before and during COVID-19 crisis," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    4. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    5. Baur, Dirk G. & McDermott, Thomas K., 2010. "Is gold a safe haven? International evidence," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1886-1898, August.
    6. Ms. Paula De Masi, 1997. "IMF Estimates of Potential Output: Theory and Practice," IMF Working Papers 1997/177, International Monetary Fund.
    7. Babatunde Akinmade & Festus Fatai Adedoyin & Festus Victor Bekun, 2020. "The impact of stock market manipulation on Nigeria’s economic performance," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-28, December.
    8. Bouri, Elie & Shahzad, Syed Jawad Hussain & Roubaud, David & Kristoufek, Ladislav & Lucey, Brian, 2020. "Bitcoin, gold, and commodities as safe havens for stocks: New insight through wavelet analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 77(C), pages 156-164.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hal:wpaper:hal-03579957 is not listed on IDEAS
    2. Akhtaruzzaman, Md & Boubaker, Sabri & Lucey, Brian M. & Sensoy, Ahmet, 2021. "Is gold a hedge or a safe-haven asset in the COVID–19 crisis?," Economic Modelling, Elsevier, vol. 102(C).
    3. Kaczmarek, Tomasz & Będowska-Sójka, Barbara & Grobelny, Przemysław & Perez, Katarzyna, 2022. "False Safe Haven Assets: Evidence From the Target Volatility Strategy Based on Recurrent Neural Network," Research in International Business and Finance, Elsevier, vol. 60(C).
    4. Alhonita Yatie, 2022. "Crypto-assets better safe-havens than Gold during Covid-19: The case of European indices," Papers 2202.10760, arXiv.org.
    5. Rizvi, Syed Kumail Abbas & Naqvi, Bushra & Mirza, Nawazish & Umar, Muhammad, 2022. "Safe haven properties of green, Islamic, and crypto assets and investor's proclivity towards treasury and gold," Energy Economics, Elsevier, vol. 115(C).
    6. Tarchella, Salma & Khalfaoui, Rabeh & Hammoudeh, Shawkat, 2024. "The safe haven, hedging, and diversification properties of oil, gold, and cryptocurrency for the G7 equity markets: Evidence from the pre- and post-COVID-19 periods," Research in International Business and Finance, Elsevier, vol. 67(PB).
    7. Syuhada, Khreshna & Hakim, Arief & Suprijanto, Djoko & Muchtadi-Alamsyah, Intan & Arbi, Lukman, 2022. "Is Tether a safe haven of safe haven amid COVID-19? An assessment against Bitcoin and oil using improved measures of risk," Resources Policy, Elsevier, vol. 79(C).
    8. Hoque, Mohammad Enamul & Soo-Wah, Low & Tiwari, Aviral Kumar & Akhter, Tahmina, 2023. "Time and frequency domain connectedness and spillover among categorical and regional financial stress, gold and bitcoin market," Resources Policy, Elsevier, vol. 85(PA).
    9. Junttila, Juha & Pesonen, Juho & Raatikainen, Juhani, 2018. "Commodity market based hedging against stock market risk in times of financial crisis: The case of crude oil and gold," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 255-280.
    10. Nedved, Martin & Kristoufek, Ladislav, 2023. "Safe havens for Bitcoin," Finance Research Letters, Elsevier, vol. 51(C).
    11. Julia S. Mehlitz & Benjamin R. Auer, 2021. "Time‐varying dynamics of expected shortfall in commodity futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(6), pages 895-925, June.
    12. Esparcia, Carlos & Jareño, Francisco & Umar, Zaghum, 2022. "Revisiting the safe haven role of Gold across time and frequencies during the COVID-19 pandemic," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).
    13. repec:rim:rimwps:18-13 is not listed on IDEAS
    14. Acikgoz, Turker, 2025. "Gold and Bitcoin as hedgers and safe havens: Perspective from nonlinear dynamics," Resources Policy, Elsevier, vol. 102(C).
    15. Duc Khuong Nguyen & Thomas Walther, 2020. "Modeling and forecasting commodity market volatility with long‐term economic and financial variables," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(2), pages 126-142, March.
    16. Yousfi, Mohamed & Farhani, Ramzi & Bouzgarrou, Houssam, 2024. "From the pandemic to the Russia–Ukraine crisis: Dynamic behavior of connectedness between financial markets and implications for portfolio management," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1178-1197.
    17. Lukáš Frýd, 2018. "Asymetrie během finančních krizí: asymetrická volatilita převyšuje důležitost asymetrické korelace [Asymmetry of Financial Time Series During the Financial Crisis: Asymmetric Volatility Outperforms the Asymmetric Importance of Correlation]," Politická ekonomie, Prague University of Economics and Business, vol. 2018(3), pages 302-329.
    18. Hampl, Filip & Vágnerová Linnertová, Dagmar & Horváth, Matúš, 2024. "Crypto havens during war times? Evidence from the Russian invasion of Ukraine," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    19. Ahmed Jeribi & Sangram Keshari Jena & Amine Lahiani, 2021. "Are Cryptocurrencies a Backstop for the Stock Market in a COVID-19-Led Financial Crisis? Evidence from the NARDL Approach," IJFS, MDPI, vol. 9(3), pages 1-36, June.
    20. Walid Mensi & Debasish Maitra & Refk Selmi & Xuan Vinh Vo, 2023. "Extreme dependencies and spillovers between gold and stock markets: evidence from MENA countries," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-27, December.
    21. Echaust, Krzysztof & Just, Małgorzata & Kliber, Agata, 2024. "To hedge or not to hedge? Cryptocurrencies, gold and oil against stock market risk," International Review of Financial Analysis, Elsevier, vol. 94(C).
    22. Stavros Stavroyiannis, 2017. "A note on the Nelson Cao inequality constraints in the GJR-GARCH model: Is there a leverage effect?," Papers 1705.00535, arXiv.org.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bba:j00007:v:3:y:2024:i:1:p:52-67:d:294. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ramona Wang (email available below). General contact details of provider: https://www.anserpress.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.