Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237435 
Year of Publication: 
2021
Citation: 
[Journal:] CBN Journal of Applied Statistics [ISSN:] 2476-8472 [Volume:] 12 [Issue:] 1 [Publisher:] The Central Bank of Nigeria [Place:] Abuja [Year:] 2021 [Pages:] 1-21
Publisher: 
The Central Bank of Nigeria, Abuja
Abstract: 
This paper examines the nonlinear effect of monetary policy decisions on the performance of the Nigerian Stock Exchange market, by employing the Smooth Transition Autoregressive (STAR) model on monthly data from 2013 M4 to 2019 M12 for All Share Index and monetary policy instrument. This study considers the two regimes characterizing the stock market, which are the lower regime (the bear market) and the upper regime (the bull market). The results show evidence of nonlinear effect of monetary policy on the stock exchange market. Monetary policy rate, money supply, lagged monetary policy rate and lagged treasury bill rate are found to have significant positive effects on the stock exchange market in the lower regime while current treasury bill rate shows a negative effect. In the upper regime, money supply and lagged treasury bill rate have significant negative effect on the stock market. The current treasury bill rate is found to have a positive effect on the stock exchange market. It is recommended that the Central Bank of Nigeria should maintain a stable money supply growth that is consistent with increased activities in the Nigerian stock market.
Subjects: 
Monetary policy
nonlinear
smooth transition autoregressive model
stock prices
JEL: 
C58
D53
E52
E58
G10
Persistent Identifier of the first edition: 
Document Type: 
Article

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