Given Nigeria’s position as an economic giant in the sub-Saharan Africa, analyzing the country’s macroeconomic policy coordination requires an understanding of its effectiveness in boosting the economy wide aggregate including stock market performance. This paper explores the effectiveness of intertemporal policy mix in fostering stock market development in Nigeria between 1986 and 2018. The specific objective focused on the effect of fiscal and monetary policy initiatives comprising public expenditure, public debt, treasury bill rate and broad money supply on the value of stock traded as a ratio of GDP. Year-end time series data on the variables were analyzed using error correction mechanism (ECM), diagnostics tests and descriptive statistics. The Philips-Perron unit root results reveal that the variables are stationary at first difference. Additionally, the cointegration test show evidence of long run relationship among the variables. It was observed from the estimated parsimonious ECM result that broad money supply and public expenditure positively and significantly influenced the value of stock traded. This indicates that public spending and monetary aggregates are the channels which monetary and fiscal policies foster the development of the stock market development in Nigeria. Given the findings, it is recommended for policy makers to synergize fiscal and monetary policy initiatives in order to foster robust and sustained development of the stock market in Nigeria.
Keywords: Fiscal Policy, Monetary Policy, Nigeria and ECM, Stock Market Development, intertemporal policy mix
