INVESTIGATING THE CAUSAL RELATIONSHIP BETWEEN POLITICAL STABILITY, FINANCIAL DEVELOPMENT, AND ECONOMIC DEVELOPMENT IN NIGERIA: EVIDENCE FROM COINTEGRATION AND TIME DOMAIN FREQUENCY TECHNIQUES
INVESTIGATING THE CAUSAL RELATIONSHIP BETWEEN POLITICAL STABILITY, FINANCIAL DEVELOPMENT, AND ECONOMIC DEVELOPMENT IN NIGERIA: EVIDENCE FROM COINTEGRATION AND TIME DOMAIN FREQUENCY TECHNIQUES

Summary/Abstract: This study explores the causal effects of financial development and political stability on economic growth utilizing recent econometric techniques. The study utilizes yearly data spanning between 1996 and 2018. The study used Bayer and Hanck Cointegration, FMOLS, DOLS, and Breitung and Candelon frequency-domain causality techniques. The Breitung and Candelon technique's advantage is that it permits us to differentiate causality in the short term, medium-term, and long-term at different frequencies. The study's motive is to address the questions: What is the long-run and causal impact of political stability and financial development on economic growth? The findings from the FMOLS and DOLS long-run estimators revealed that political stability exerts a negative impact on economic growth while no evidence significant linkage between financial development and economic growth. Furthermore, the findings from the frequency-domain causality test revealed that in the short-run, medium-run, and long-run, political stability could predict economic growth in Nigeria, and there is no evidence of causality from economic growth to political stability in the short-run, medium-run, and long-run. Lastly, our findings reveal no causal interconnection from financial development to economic growth in the short-run, medium run, and long-run, while there is no evidence of causality from economic growth.

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