Title: Asymmetric nonlinear analyses of banking sector behaviour, markets and interest rate risks in Africa's frontier economy

Authors: Augustine C. Arize; Ebere Ume Kalu; John Malindretos; Asli Ogunc

Addresses: College of Business, Texas A&M University-Commerce, Commerce, TX 75429, USA ' Department of Banking and Finance, University of Nigeria, Nsukka, Enugu State, Nigeria ' Cotsakos College of Business, William Paterson University, Wayne, NJ 07470, USA ' College of Business, Texas A&M University-Commerce, Commerce, TX 75429, USA

Abstract: With the possibility of a change in the narrative from the long-held linearity assumption to a nonlinearity and asymmetric discovery in the bank, market and the interest rate risk relationship, this paper explores the banks, stock market development and interest rate risk connection in the context of the Nigerian financial system. Empirical evidence arising from the study indicates that bank development exhibits interest rate sensitivity and changes in inverse direction with the interest rate. Moreover, the results strongly support asymmetry and nonlinearity in the relationship between bank development and stock market development. It is therefore recommended that policy efforts directed towards the development of the financial system should strike a balance between the linear/symmetric assumption and the nonlinear/asymmetric assumption.

Keywords: bank development; stock market development; asymmetries; linearity; nonlinearity; NARDL.

DOI: 10.1504/AAJFA.2021.117725

Afro-Asian Journal of Finance and Accounting, 2021 Vol.11 No.4, pp.537 - 560

Received: 24 Oct 2018
Accepted: 16 Jun 2019
Published online: 23 Sep 2021 *

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