May 2019 | AJBFMR

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Published: 17 May 2019


The study investigated the interaction between exchange rate and stock prices movement in Nigeria for the period of 1986 to 2017. Exchange rate, gross domestic product, inflation and interest rate were used to determine the interaction between exchange rate and stock prices movement proxied as all share index in Nigeria. The study employed unit root test was used to test the stationarity of the variables, the Auto Regressive Distribution Lag (ARDL) test to test for the presence of long run relationship among the variables, Error Correction model to show the rate at which short-run inconsistencies are being corrected and incorporated into the long-run equilibrium relationship. The result of the study found that the exchange rate has a negative and significant relationship with all share price; gross domestic product has negative and significant interaction with all share index; inflation rate revealed a negative and insignificant interrelationship with all share index; interest rate displayed positive and statistically insignificant nexus with all share price in Nigeria; a uni-directional causality flowed from ASI to INT. It was concluded that the exchange rate has a weak interrelationship with stock prices movement under study review in Nigeria. The study recommended that a conducive business environment should be stimulated by the government in order to enhance the real sector and boost the economy through an increase in savings and investment.

Keywords: Exchange rate, Stock prices, Nigeria.Read: [Full Text - PDF]