Does Inflation Granger Cause Stock Market Performance in Nigeria?

Ogunmuyiwa, Michael Segun

Abstract


The crux of this paper was an investigation of the direction of causality between inflation and movements in stock market index in Nigeria. While attempting to do  this, monthly time series data from June 2011 to March 2013 were fitted to Augmented Dickey Fuller (ADF) and Phillips Perron (PP) tests as well as the Granger causality test. Empirical findings revealed that inflation and NSE index are I(2) and I(1) series respectively. The Granger causality test revealed a weak unidirectional causality from inflation to stock index and this means that inflation is not a strong factor determining movements in stock market variables in Nigeria.

Keywords: Inflation Rate, Nse Index, Causality.


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ISSN (Paper)2224-607X ISSN (Online)2225-0565

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