Stock Market-Growth Relationship in an Emerging Economy: Empirical Finding from ARDL-Based Bounds and Causality Approaches

Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 12 June 2020

Stock Market-Growth Relationship in an Emerging Economy: Empirical Finding from ARDL-Based Bounds and Causality Approaches

Tomiwa Sunday Adebayo, Abraham Ayobamiji Awosusi, Fehiman Eminer

Cyprus International University, Near East University, European University of Lefke Mersin

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Pages: 903-916

Keywords: Stock Market, Economic Growth, ARDL, Toda Yamamoto, Variance Decomposition


This paper tends to establish the short and long run dynamics between stock market and GDP growth in Nigeria utilizing yearly data spanning between 1989 and 2017. The paper deployed the ARDL, FMOLS, DOLS, Toda Yamamoto causality and the variance decomposition techniques to verify these dynamics. The ARDL Bounds test reveals evidence of cointegration in the long run among the variables. The ARDL estimate reveals market capitalization of listed companies affects economic growth positively in the short and long run. Also, stocks market turnover ratio positively impacts economic growth while stock market total value positively affects GDP in the short run. The result of the Toda Yamamoto causality revealed one-way causality from Stocks market turnover ratio to economic growth and from Stock market total value traded to economic growth. The variance decomposition revealed the strength of causality among the variables for a relatively longer period. Based on these findings, recommendations were put forward.


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