Financial Market, Monetary Policy and Economic Growth: Evidence from Nigeria

Abstract

This study examined the impact of financial market and monetary policy on the Nigerian economy since Nigeria introduced democratic rule in 2001 to 2020. Financial market was proxied by total market capitalization, while monetary policy was proxied by money supply, and interest rate the moderator variable. The ADF unit root was adopted to test the level of stationarity of the variables, and all the variables attained stationarity either at first difference or at second difference. The study adopted the regression analysis as the data analysis method. Findings from the study revealed that: Market capitalization, a proxy for financial market had positive and significant impact on Gross Domestic Product, a proxy for the Nigerian economy, Money supply, a proxy for monetary policy had positive and significant impact on Gross Domestic Product, a proxy for the Nigerian economy and Interest rate, a moderator variable had a positive but not significant impact on Gross Domestic Product, a proxy for the Nigerian economy. The study therefore recommends that: Government should restore confidence in the financial market by showing true commitment and sincerity of purpose in the capital market probe, there is need for a diversified investment instruments in the capital market whereby debt and derivative instruments will assume as much prominence as ownership instruments and Government should do everything possible to provide a safe and conducive investment climate by nipping in the bud, the prevalent activities of terrorist and kidnappers. This will not only encourage the Nigerian investors, but also attract foreign investors into the Nigerian capital market.