Abstract:
Excessive volatility in financial markets can disrupt economic activity, affect investor and consumer confidence, and
potentially lead to financial crises in an economy. Due to this backdrop, this study examined the link between asset
class volatility and the output gap in Nigeria. The asset classes were categorized into stock, crude, gold, and bitcoin.
The study adopted the ARCH and Bayesian VAR approach and found that all share index has an initial negative
impulse with output gap while other asset classes have a positive impulse on output gap. The outcome of this study
revealed to both policymakers and economists the potential risks and vulnerabilities of asset class volatility in the
economy. Based on this result, recommendations are made amongst which is the strengthening of the Nigerian stock
market to help with the inflationary pressures this is because the Nigerian stock market hurt the output gap also,
the government should prioritize investing in crude, gold, and bitcoin to push the actual output to full capacity,
which brings about employment.
