Rufus Ayodeji Olowe
African Review of Money Finance and Banking 2007, pp. 79-98

This paper examines the dynamic equilibrium relationship between a group of macroeconomic variables and the Nigerian Stock Exchange index, using Johansen’s (1991) vector error correction model. The macroeconomic variables investigated include the industrial production index, the consumer price index, money supply, oil prices and treasury bill rate. The estimation of the vector error correction model was done under two alternative definitions of money supply: M1 and M2. The results show that a cointegrating relation exists among macroeconomic variables. The cointegration relationship is consistent with earlier studies, unlike the signs of some of the variables, which are inconsistent with earlier studies.

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