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This paper examines the long-run impact of macroeconomic indicators such as interest rate, foreign capital flows, exchange rate, GDP growth, inflation and trade on stock market performance (market capitalization) in Nigeria. Using data drawn from the World Development Indicators (WDI, 2018) and the Central Bank of Nigeria (CBN) Statistical Bulletin 2018, the study employed the VECM analysis. The results found suggest that 1) macroeconomic variables and stock market performance are cointegrated and thus linked in the long run; 2) interest rate, inflation and trade bear a negative relationship with stock market performance; and 3) exchange rate, GDP growth rate and foreign capital flows are positively related to stock market performance. Our results show that when there is a deviation from the long-run relation between stock market performance and mafcroeconomic fundamentals, it is primarily the stock market, interest rate and foreign capital flows that adjust to ensure that the long-run link is restored, whereas exchange rate, GDP growth, inflation and trade are weakly exogenous. We estimate that any disequilibrium emanating from interest rate is more than fully corrected in one year, in the oscillating convergence sense, while 29% and 5% of the disequilibrium from stock
PurposeThe threshold regression framework is used to examine the effect of foreign direct investment on growth in Sub-Saharan Africa (SSA). The growth literature is awash with divergent evidence on the role of foreign direct investment (FDI) on economic growth. Although the FDI–growth nexus has been studied in diverse ways, very few studies have examined the relationship within the framework of threshold analysis. Furthermore, even where this framework has been adopted, none of the previous studies has comprehensively examined the FDI–growth nexus in the broader SSA. In this paper, within the standard panel and threshold regression framework, the problem of determining the growth impact of FDI is revisited.Design/methodology/approachSix variables are used as thresholds – inflation, initial income, population growth, trade openness, financial market development and human capital, and the analysis is based on a large panel data set that comprises 45 SSA countries for the years 1985–2013.FindingsThe results of this study show that the direct impact of FDI on growth is largely ambiguous and inconsistent. However, under the threshold analysis, it is evident that FDI accelerates economic growth when SSA countries have achieved certain threshold levels of inflation, population growth and financial markets development. This evidence is largely invariant qualitatively and is robust to different empirical specifications. FDI enhances growth in SSA when inflation and private sector credit are below their threshold levels while human capital and population growth are above their threshold levels.Originality/valueThe contribution of this paper is twofold. First, the paper streamlines the threshold analysis of FDI–growth nexus to focus on countries in SSA – previous studies on FDI-growth nexus in SSA are country-specific and time series–based (see Tshepo, 2014; Raheem and Oyınlola, 2013 and Bende-Nabende, 2002). This paper provides a panel analysis and considers a broader set of up to 45 SSA countries. Such a broad set of SSA countries had never been considered in the literature. Second, the paper expands on available threshold variables to include two new important macroeconomic variables, population growth and inflation which, though are important absorptive capacities but, until now, had not been used as thresholds in the FDI–growth literature. The rationale for including these variables as thresholds stems from the evidence of an empirical relationship between population growth and economic growth, see Darrat and Al-Yousif (1999), and between inflation and economic growth, see Kremer et al. (2013).
We examine the importance of firm size in the relationship between research & development (R&D) and firm performance. Our empirical analysis, based on data drawn from Nasdaq-listed companies for the period 2002 to 2017, shows that R&D can have effects of varying magnitudes on firm performance, depending on firm size. When R&D weakens firm performance, the negative effects are more pronounced for small-sized firms, but when the impact of R&D is positive, leading to an improvement in firm performance from increased R&D, largesized firms tend to reap most of the benefits. Accordingly, we show that firm size matters in understanding the scale of the impact of R&D on firm performance.
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