Analysis of the relationship between Oil price, Exchange rate and Stock market in Nigeria

Raheem, Aremu Idowu and Ayodeji, Musa Adebiyi (2016): Analysis of the relationship between Oil price, Exchange rate and Stock market in Nigeria.

Abstract

The objective of this paper is to analyze the dynamic effects of oil price shock and exchange rate on the Nigeria stock market using monthly data from June 1999 to December 2014, applying Vector Autoregression (VAR) Model. Granger Causality Test, Impulse Response Functions (IRFs) and Variance Decomposition (VDC) were also used to aid in the analysis of the results. The findings showed that oil price, exchange rate and stock market are not co-integrated. Granger Causality Test result indicate that there is bidirectional causality between stock price and exchange rate, also there is bidirectional causality between oil price and exchange rate but unidirectional causality from oil proceed to exchange rate.

• Item Type: MPRA Paper
• Language: English
• Keywords: Causality,Exchange Rate, Oil Price and Stock market
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E60 - General

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