THE RELATIVE CONTRIBUTION OF MONEY MARKET AND CAPITAL MARKET TO ECONOMIC GROWTH

ABSTRACT

This study empirically examined the relative contribution of the money market and capital market to economic growth of Nigeria from 1985-2019. Being a time series data, and to avoid spurious regression result in our model, a test for stationary of the data using Augmented Dickey-Fuller unit root test was carried out. The variables; Growth rate of GDP, money supply, bank credit, market capitalization and value of deals were found to be stationary at their first difference. Then Johansen co-integration technique was used to establish if the stationary variables are co-integrated in the long-run. The Trace statistic and the Max-Eigen values indicates that all the variables were found to be co-integrated in the long run. Further, ECM was employed to correct for any form of dis-equilibrium in the short run. The model specified Growth Rate of GDP (GRG) as the dependent variable, while Money Supply (MSS) Bank Credit (BCRE), Market Capitalization (MCAP), and Value of Deals (VOD) were the independent variables. The ECM result revealed that MSS (positive impact), BCRE (negative impact), MCAP (negative impact), and VOD (negative impact) exerts insignificant influence on the GRG in Nigeria within the period under consideration. It recommends amongst others, the government through the CBN should put in place appropriate and sound macroeconomic policies (particularly monetary) to boost the development of the money market and the capital market with a view to stimulating the growth rate of GDP in Nigeria. The study therefore concludes that the relative contribution of the money market and capital market to economic growth in Nigeria has not fully materialized..