Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework

Ejem Chukwu Agwu; Ogbonna Udochukwu Godfrey

doi:doi:10.11648/j.ml.20200603.12

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Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework

Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey

Published in Mathematics Letters (Volume 6, Issue 3)

Received: 18 July 2020 Accepted: 26 August 2020 Published: 31 December 2020

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Abstract

This study captured the components of Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH-in-mean) framework; conditional variance (volatility), asymmetric effect and volatility persistence and interest rate in Nigeria. This is because ofthe usefulness of interest rates in measuring the financial conditions, also are major instrument of monetary policy and volatility being one of the most important concepts in finance. The study used real interest rate obtained from Central Bank of Nigeria and National Bureau of Statistic from 1970 to 2018 inclusive. The accommodating EGARCH-in-mean framework was employed in the estimation of the model. The following were found; conditional volatility is negatively and significantly related to interest rate. Also that interest rate volatility in Nigeria is not persistent. Again, there is existence of leverage effect, implying existence of asymmetric effect in the Nigerian financial market due to interest rate volatility. Consequently, the researchers suggest as follows; due to the presence of asymmetry effect, the Bankers’ Committee tightens their seat belt to forestall subsequent volatility in interest rate in Nigeria by consistently and regularly reviewing interest rate to accommodate the dynamism of the economy. Again adequate palliative measures be made available to enable investors continue with their economic activity in any business cycle in Nigeria.

Published in	Mathematics Letters (Volume 6, Issue 3)
DOI	10.11648/j.ml.20200603.12
Page(s)	36-41
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Real Interest Rate, Volatility, Volatility Persistence, Asymmetric Effect, EGARCH

References

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Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey. (2020). Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework. Mathematics Letters, 6(3), 36-41. https://doi.org/10.11648/j.ml.20200603.12

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ACS Style

Ejem Chukwu Agwu; Ogbonna Udochukwu Godfrey. Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework. Math. Lett. 2020, 6(3), 36-41. doi: 10.11648/j.ml.20200603.12

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AMA Style

Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey. Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework. Math Lett. 2020;6(3):36-41. doi: 10.11648/j.ml.20200603.12

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@article{10.11648/j.ml.20200603.12,
  author = {Ejem Chukwu Agwu and Ogbonna Udochukwu Godfrey},
  title = {Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework},
  journal = {Mathematics Letters},
  volume = {6},
  number = {3},
  pages = {36-41},
  doi = {10.11648/j.ml.20200603.12},
  url = {https://doi.org/10.11648/j.ml.20200603.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ml.20200603.12},
  abstract = {This study captured the components of Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH-in-mean) framework; conditional variance (volatility), asymmetric effect and volatility persistence and interest rate in Nigeria. This is because ofthe usefulness of interest rates in measuring the financial conditions, also are major instrument of monetary policy and volatility being one of the most important concepts in finance. The study used real interest rate obtained from Central Bank of Nigeria and National Bureau of Statistic from 1970 to 2018 inclusive. The accommodating EGARCH-in-mean framework was employed in the estimation of the model. The following were found; conditional volatility is negatively and significantly related to interest rate. Also that interest rate volatility in Nigeria is not persistent. Again, there is existence of leverage effect, implying existence of asymmetric effect in the Nigerian financial market due to interest rate volatility. Consequently, the researchers suggest as follows; due to the presence of asymmetry effect, the Bankers’ Committee tightens their seat belt to forestall subsequent volatility in interest rate in Nigeria by consistently and regularly reviewing interest rate to accommodate the dynamism of the economy. Again adequate palliative measures be made available to enable investors continue with their economic activity in any business cycle in Nigeria.},
 year = {2020}
}

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TY  - JOUR
T1  - Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework
AU  - Ejem Chukwu Agwu
AU  - Ogbonna Udochukwu Godfrey
Y1  - 2020/12/31
PY  - 2020
N1  - https://doi.org/10.11648/j.ml.20200603.12
DO  - 10.11648/j.ml.20200603.12
T2  - Mathematics Letters
JF  - Mathematics Letters
JO  - Mathematics Letters
SP  - 36
EP  - 41
PB  - Science Publishing Group
SN  - 2575-5056
UR  - https://doi.org/10.11648/j.ml.20200603.12
AB  - This study captured the components of Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH-in-mean) framework; conditional variance (volatility), asymmetric effect and volatility persistence and interest rate in Nigeria. This is because ofthe usefulness of interest rates in measuring the financial conditions, also are major instrument of monetary policy and volatility being one of the most important concepts in finance. The study used real interest rate obtained from Central Bank of Nigeria and National Bureau of Statistic from 1970 to 2018 inclusive. The accommodating EGARCH-in-mean framework was employed in the estimation of the model. The following were found; conditional volatility is negatively and significantly related to interest rate. Also that interest rate volatility in Nigeria is not persistent. Again, there is existence of leverage effect, implying existence of asymmetric effect in the Nigerian financial market due to interest rate volatility. Consequently, the researchers suggest as follows; due to the presence of asymmetry effect, the Bankers’ Committee tightens their seat belt to forestall subsequent volatility in interest rate in Nigeria by consistently and regularly reviewing interest rate to accommodate the dynamism of the economy. Again adequate palliative measures be made available to enable investors continue with their economic activity in any business cycle in Nigeria.
VL  - 6
IS  - 3
ER  -

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Author Information

Ejem Chukwu Agwu

Department of Banking and Finance, Abia State University, Uturu, Nigeria
Ogbonna Udochukwu Godfrey

Department of Management Science, Rhema University, Aba, Nigeria

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APA Style

Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey. (2020). Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework. Mathematics Letters, 6(3), 36-41. https://doi.org/10.11648/j.ml.20200603.12

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ACS Style

Ejem Chukwu Agwu; Ogbonna Udochukwu Godfrey. Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework. Math. Lett. 2020, 6(3), 36-41. doi: 10.11648/j.ml.20200603.12

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AMA Style

Ejem Chukwu Agwu, Ogbonna Udochukwu Godfrey. Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework. Math Lett. 2020;6(3):36-41. doi: 10.11648/j.ml.20200603.12

Copy | Download

@article{10.11648/j.ml.20200603.12,
  author = {Ejem Chukwu Agwu and Ogbonna Udochukwu Godfrey},
  title = {Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework},
  journal = {Mathematics Letters},
  volume = {6},
  number = {3},
  pages = {36-41},
  doi = {10.11648/j.ml.20200603.12},
  url = {https://doi.org/10.11648/j.ml.20200603.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ml.20200603.12},
  abstract = {This study captured the components of Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH-in-mean) framework; conditional variance (volatility), asymmetric effect and volatility persistence and interest rate in Nigeria. This is because ofthe usefulness of interest rates in measuring the financial conditions, also are major instrument of monetary policy and volatility being one of the most important concepts in finance. The study used real interest rate obtained from Central Bank of Nigeria and National Bureau of Statistic from 1970 to 2018 inclusive. The accommodating EGARCH-in-mean framework was employed in the estimation of the model. The following were found; conditional volatility is negatively and significantly related to interest rate. Also that interest rate volatility in Nigeria is not persistent. Again, there is existence of leverage effect, implying existence of asymmetric effect in the Nigerian financial market due to interest rate volatility. Consequently, the researchers suggest as follows; due to the presence of asymmetry effect, the Bankers’ Committee tightens their seat belt to forestall subsequent volatility in interest rate in Nigeria by consistently and regularly reviewing interest rate to accommodate the dynamism of the economy. Again adequate palliative measures be made available to enable investors continue with their economic activity in any business cycle in Nigeria.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Conditional Variance and Interest Rates in Nigeria: Evidence from the Egarch-in-Mean Framework
AU  - Ejem Chukwu Agwu
AU  - Ogbonna Udochukwu Godfrey
Y1  - 2020/12/31
PY  - 2020
N1  - https://doi.org/10.11648/j.ml.20200603.12
DO  - 10.11648/j.ml.20200603.12
T2  - Mathematics Letters
JF  - Mathematics Letters
JO  - Mathematics Letters
SP  - 36
EP  - 41
PB  - Science Publishing Group
SN  - 2575-5056
UR  - https://doi.org/10.11648/j.ml.20200603.12
AB  - This study captured the components of Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH-in-mean) framework; conditional variance (volatility), asymmetric effect and volatility persistence and interest rate in Nigeria. This is because ofthe usefulness of interest rates in measuring the financial conditions, also are major instrument of monetary policy and volatility being one of the most important concepts in finance. The study used real interest rate obtained from Central Bank of Nigeria and National Bureau of Statistic from 1970 to 2018 inclusive. The accommodating EGARCH-in-mean framework was employed in the estimation of the model. The following were found; conditional volatility is negatively and significantly related to interest rate. Also that interest rate volatility in Nigeria is not persistent. Again, there is existence of leverage effect, implying existence of asymmetric effect in the Nigerian financial market due to interest rate volatility. Consequently, the researchers suggest as follows; due to the presence of asymmetry effect, the Bankers’ Committee tightens their seat belt to forestall subsequent volatility in interest rate in Nigeria by consistently and regularly reviewing interest rate to accommodate the dynamism of the economy. Again adequate palliative measures be made available to enable investors continue with their economic activity in any business cycle in Nigeria.
VL  - 6
IS  - 3
ER  -

Copy | Download