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Fiscal Policy and Stock Market Efficiency in Nigeria: Evidence from SVAR Framework

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  • Mohammed Ibrahim Danlami

    (Monetary Policy Department, Central Bank of Nigeria, Abuja)

  • Sanusi Yakubu Muhammad

    (Monetary Policy Department, Central Bank of Nigeria, Abuja)

Abstract

This research investigates the impact of fiscal policy on stock market efficiency in Nigeria evidence from SVAR Modelling. The study used quarterly data between 2010Q1 to 2023Q2. Key finding is that shock to public debt caused more fluctuation to stock price in both the short-run and in the long-run by 13.2 per cent and 13.59, respectively. Shocks from government expenditure caused 9.6 per cents and 9.96 per cent fluctuation in stock price in the short and long-run, respectively. A one standard deviation positive shock or innovation to government expenditure caused stock price to fluctuate by 0.73 per cent and 0.75 per cents, respectively in the short and long-run. However, public debt appears to be an effective stock price tool to control and achieve stability in the capital market than the government expenditure and revenue. This study concludes that government should continue to participate more in the stock market for it to grow, since the government stocks constituting the major segments of the bond market. The effective use of fiscal policies, particularly public debt to set the market on the path of growth and development, which would promote investors’ confidence to lessen price bubbling.

Suggested Citation

  • 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.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:12:p:89-99
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    References listed on IDEAS

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