The Linkage between Emerging and Developed Markets: Implication for International Portfolio Diversification

This study is a holistic attempt to examine the linkage between emerging and developed markets between January 2012 and June 2016 using iShares MSCI Emerging Markets ETF and iShares MSCI World ETF to measure emerging and developed markets respectively. Employing three cointegration testing approach, this study reveals that there is no cointegration between emerging and developed markets, thus indicating that international portfolio diversification is feasible for investors holding financial assets in both markets. This finding suggests that investors can reduce risk by constructing a portfolio consisting of assets in both emerging and developed markets

Import-economic growth nexus in selected African countries: An application of the Toda-Yamamoto Granger non-causality test

We determine the nexus between imports and economic growth for a sample of 26 African countries for the period 1990-2015 within the neoclassical production function framework. We mainly contribute to literature by overcoming the weak theoretical modelling framework and possible model specification bias in most extant studies. Using the Toda-Yamamoto Granger non-causality test, the empirical results indicate that there is absence of causality between imports and economic growth in more than half of the countries in the sample, thus suggesting that neutrality hypothesis is predominant among the countries. We provide ample evidence that causality is absent from imports to economic growth. However, our results should be treated with caution because the absence of causality from imports to economic growth should not imply that imports do not play a role in the growth process of an economy

Evaluating the Relative Impact of Monetary and Fiscal Policy in Nigeria using the St. Louis Equation

The controversy existing on the efficacy of monetary and fiscal policy to influence the economy is unending. This study evaluates the relative impact of monetary and fiscal policy in Nigeria from 1986 to 2014 using a modified St. Louis equation. Employing the Ordinary Least Squares estimation method, this study reveals that growth in money supply and export have a positive and significant effect on growth in  output of the economy while growth in government expenditure has a negative and insignificant effect. This study provides evidence that monetary policy has a greater growth-stimulating effect on the economy than fiscal policy.  It recommends that monetary policy rather than fiscal policy should be relied upon by the Nigerian government as an economic stabilisation tool

Investigating Okun's Law in Nigeria through the Dynamic Model

 Unemployment is a persistent challenge for countries, especially the developing ones. Nigeria as a developing country faces a herculean task reducing the increasing spate of joblessness amongst her citizens. Okun’s law explains the relationship between unemployment and economic growth in an economy. This study therefore investigates Okun’s law in Nigeria between 1985 and 2015 through the dynamic model. The generalized method of moments estimation result reveals that that present and past output growth are negatively related to unemployment rate. However, only past output growth has a significant effect on unemployment rate. It also shows that past unemployment rate is significantly and positively associated with present unemployment rate. The Toda-Yamamoto Granger non-causality test finds that there is no causality between unemployment and economic growth. This study presents evidence to partially support Okun’s law of inverse relationship between unemployment and output growth and suggests that promoting economic growth can be a policy tool for reducing unemployment rate in Nigeria.&nbsp

Efficiency of Foreign Exchange Markets in Sub-Saharan Africa in the Presence of Structural Break: A Linear and Non-Linear Testing Approach

This study examines the efficiency of foreign exchange (forex) market of 10 selected countries in sub-Saharan Africa in the presence of structural break. It uses data on the average official exchange rate of currencies of the selected countries to the US dollar from November 1995 to October 2015. This study employs Perron unit root test with structural break to endogenously determine the break period in the forex markets. It also employs the Kim wild bootstrap variance ratio test and BDS independence test to detect linear and nonlinear dependence in forex market returns respectively. In the full sample period, the Kim wild bootstrap joint variance ratio test shows that only two forex markets are efficient while the BDS independence test reports that all the forex markets are not efficient. The subsample period analysis indicates that the efficiency of the majority of the forex markets is sensitive to structural break, thus providing evidence in support of the adaptive market hypothesis. This study suggests that ignoring structural break and nonlinearity of returns may lead to misleading results when testing for market efficiency

Modelling Volatility Persistence and Asymmetry with Structural Break: Evidence from the Nigerian Stock Market

Abstract: This study contributes to existing literature on the Nigerian stock market by modelling the persistence and asymmetry of stock market volatility taking into account structural break. It utilises returns generated from data on monthly all-share index from January 1985 to December 2014. After identifying structural break in the return series, the study splits the sample period into pre-break period (January 1985 – November 2008) and post-break period (January 2009 – December 2014). Using the symmetric GARCH model, the study shows that the sum of ARCH and GARCH coefficients is higher in the pre-break period compared to the post-break period, thus indicating that persistence of shock to volatility is higher before structural break in the market. The asymmetric GARCH model provides no evidence of asymmetry as well as leverage effect with or without accounting for structural break in the Nigerian stock market. This study concludes that the Nigerian stock market is characterised by inefficiency, high degree of uncertainty and non-asymmetric volatility.Keywords: Persistence, asymmetry, stock market volatility, structural brea

Determinants of small and medium scale enterprises financing by the banking sector in Nigeria: a macroeconomic perspective

This study assesses from a macroeconomic perspective the determinants of small and medium scale enterprises (SMEs) financing by the banking sector in Nigeria between 1992 and 2014. The empirical model specifies commercial banks’ lending to SMEs as a function of selected macroeconomic indicators which include commercial banks’ total deposits, financial deepening, interest rate spread, lending rate, monetary policy rate, commercial banks’ total assets and inflation rate. The 2SLS estimation results show that only commercial banks’ deposit mobilization, depth of the financial sector and size of the banking sector act as determinants of SMEs financing by commercial bank

How financial liberalization impacts stock market volatility in Africa: evidence from Nigeria

Understanding the impact of financial liberalization on stock market is important for decision making by investors. The neo-classical economists believe that financial liberalization reduces stock market volatility while the post-Keynesian economists argue that financial liberalization increases volatility of the stock market. This study investigates the effect of financial liberalization on the volatility of an emerging stock market in Africa, with particular focus on the Nigerian stock market. The estimation results reveal that financial liberalization has a significant positive impact on return volatility, thus indicating that it increases stock market volatility. Also, the study finds no evidence of asymmetry in the stock market

Is foreign direct investment globalization‐induced or a myth? A tale of Africa

Foreign direct investment (FDI) provides many African countries an important source of capital inflow. Despite notable improvements in these capital-scarce countries' economic, political, and social conditions, foreign investors have not considered them viable host locations. Since FDI brings enormous spillovers to its host, some countries have recently institutionalized globalization as the catalyst for reversing the trend. Against this backdrop, we examine the FDI–globalization nexus across 47 African countries for the 1996–2016 period. Using the augmented mean group estimator, the results suggest that FDI in Africa is indeed globalization-induced. Moreover, we find this positive nexus to be driven by the economic dimension of globalization. Overall, we demonstrate the potential of globalization in stimulating an FDI boom in Africa