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Domestic Debt and Economic Growth in Nigeria: An ARDL Bounds Test Approach

Abstract

The study examines the long-run relationship between domestic debt and the fiscal policy of economic growth in Nigeria in the period from 1981 to 2013 owing to government reforms in the financial system, particularly due to the establishment of the Debt Management Office (DMO) in 2000 and a new fully funded pension fund scheme, both of which resulted in a resurgence of the debt market. The issue that is often raised is the doubt regarding the stability of the debt and its likely implications for the economy, as well as the unpleasant consequences for the government embarking on consolidation. The study employs the autoregressive distributed lag (ARDL) approach and the bounds test as proposed by Narayan (2005), anchored on the perspective of the endogenous growth theory. The results reveal that although overall the adverse negative domestic debt hurts the economy, it has a positive effect on the total aggregate government revenue and economic growth in Nigeria in the research period. Furthermore, the paper develops a system to assess the speed of the adjustment mechanism coefficient in an error correction model (ECM).

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Hedging effectiveness for international index futures markets

Abstract

This paper investigates the hedging effectiveness of the International Index Futures Markets using daily settlement prices for the period 4 January 2010 to 31 December 2015. Standard OLS regressions, Error Correction Model (ECM), as well as Autoregressive Distributed Lag (ARDL) cointegration model are employed to estimate corresponding hedge ratios that can be employed in risk management. The analyzed sample consists of daily closing market rates of the stock market indexes of the USA and the European futures contracts. The findings indicate that the time varying hedge ratios, if estimated through the ARDL model, are more efficient than the fixed hedge ratios in terms of minimizing the risk. Additionally, there is evidence that the comparative advantage of advanced econometric approaches compared to conventional models is enhanced further for capital markets within peripheral EU countries

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