Acta Universitatis Danubius. Œconomica, Vol 15, No 6 (2019)

The Implication of Capital Market Development on Manufacturing Sector in Nigeria Within the Framework of ARDL – Bound Testing Approach

Adekunle Oludayo Elijah


This study examined the short run and long run effect of capital market on manufacturing output in Nigeria using Bound Test and Autoregressive Distributed Lag. The results of the unit root test revealed that manufacturing output, market capitalization, volume of transactions and all share price index were integrated at first difference. The study found evidence of long run relationship between manufacturing output, market capitalization, volume of transactions and all share price index as indicated by Bound Test. The result of the ARDL revealed that market capitalization had significant and positive effect on manufacturing output both in the long run and short run. Also, volume of transactions had positive effect on manufacturing sector output in the short run but negative in the long run while all share price index had negative and insignificant effect on manufacturing output both in the short run and long run. The result of the granger causality test showed that both market capitalization and all shared price index did not granger caused manufacturing sector output while volume of transaction granger cause manufacturing sector output.       The study thus concluded that, capital market has been partly ineffective in funding the activities of the manufacturing sector especially in the long run in Nigeria. The study recommended that there is need for relaxation and elimination of stringent rules and requirement for entering into the market by small, medium and large manufacturing companies in order to increase the rate of market capitalization in the market which attracts investable funds from idle sector of the economy. Finally, regulatory authorities should focused more on long term stability of the capital market through the formulation of stable macroeconomic policies in the economy.   


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