Capital Market Indicators and Economic Growth in Nigeria; An Autoregrssive Distributed Lag (ARDL) Model

This study examined the impact of capital market indicators on economic growth in Nigeria from 1986 – 2016. The study adopted Auto Regressive Distributed Lag bound testing and VAR Granger causality econometric tools of estimation to test the variables in the model. The result of the estimation showed a stable long run relationship between the dependent and independent variables as supported by the greater bound value of 10.58. The result of the ARDL revealed that market capitalization has positive significant relationship with economic growth; also, stock traded total value indicated a negative insignificant link with economic growth, all in the short run. The findings further revealed that Market Capitalization percent of GDP and Stock Traded Total Value percent of GDP exhibited a negative insignificant link with economic growth in the long run within the period of the study. Findings of VAR Granger test revealed that, causality was seen from MCAPGDP to GGDP with a probability value of 0.0034.The study therefore recommends supportive business environment that will enable growth in market capitalization through investment. Also, policy focus should be on increase in money supply as this will stimulate the growth of the capital market especially through increase in market capitalization. More so, there should be deliberate policy to promote development of domestic capital formation through conscious increase in local investment so as to benefit from its positive relationship with economic growth.