CRUDE OIL PRICE, STOCK PRICE AND SOME SELECTED MACROECONOMIC INDICATORS: AN IMPLICATION ON THE GROWTH OF NIGERIAN ECONOMY

Idowu Paul Olanitori, Olaiya Hawley Ademulegun, Olateru Olagbegi Adeparubi

Abstract


Since the first oil price oscillation in 1973s, macroeconomists have viewed sharp measures in the price of oil are generally as an important source of economic vacillations. The go-slow of economic activities has important implications for economic agents and markets. Therefore, this paper models and forecasts the crude oil price, stock price and selected macroeconomic variables in Nigeria. A model predicated on the Keynesian model using yearly data between 1986 and 2016 and analysed using VECM and GARCH approaches. The findings showed that there is long run relationship through Vector Error Correction Model which was achieved well in forecasting the selected macroeconomic variables while the volatility in crude oil price and stock price causes by external and internal forces also captured by General Autoregressive Conditional Heteroskadasticity. The long run negative effect of macroeconomic variable on economy growth can be controlled by making strong fiscal and monetary policies. The 2016 recession was reinforced by all share index and exchange rate as the path of growth declined over the forecast horizon. Further checks carried out using normality test validated the choice of this work. The paper concludes that monetary and exchange rate policy consistency are decisive for smoothening business rotation vacillations and promoting market stability.

JEL: L10; E30

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Keywords


crude oil price, stock price, gross domestic product, Vector Error Correction Mechanism (VECM), General Autoregressive Conditional Heteroscedasticity (GARCH) and macroeconomic

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DOI: http://dx.doi.org/10.46827/ejefr.v5i2.1134

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