The Impact of Macroeconomic Volatility and Interest Rate Differences in Stock Market Liquidity in Nigeria and South Africa (1983–2022)

Orientation- High market volatility increases unfavorable market risk premium.Investors have a keen interest in knowing variables that may help forecast stock prices.
Research purpose: The study examined the impact of macroeconomic volatility and interest rate differentials on stock market liquidity in Nigeria and South Africa.
Motivation for the study: While prior research has established that macroeconomic instability and financial liquidity variables determine stock market volatility in Africa, less research attention has been paid on the factors that can buffer better relationship.
Research approach/design and method- This study was structured to capture the relationships that exist between macroeconomic volatility and the interest rate differential on stock market liquidity, which implied that ex-post facto and analytical research designs were used. It relies extensively on secondary data, which was obtained from World Bank development indicators for the selected two countries from 1986–2022.
Main findings: Findings indicated that Macroeconomic volatility has a positive and significant effect on the stock market liquidity in Nigeria, while in South Africa, macroeconomic volatility has a positive and non-significant effect on the stock market liquidity.
Practical/managerial implications: These findings implicate the need for government enacts sound monetary policies in order to enhance economic growth in Nigeria and South Africa.
Contribution/value-add: This study is one of the first to show that the possibility thatmacroeconomic variables such as GDP, money supply, industrial production, are unstable and weak when it comes to absorbing stock.

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The authors declare no conflict of interest.

Not applicable

The datasets used in this study are openly available at [repository link] and the source code is available on GitHub at [GitHub link].

This work did not receive any external funding.