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Stock Markets, Banks and Economic Growth: Time Series Evidence from South Africa

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Author Info

  • Umar Bida Ndako

    ()
    (Bayero University, Nigeria)

Abstract

The paper examines the causal relationship between stock market development and economic growth in South Africa while controlling for the effect of banking variable. It applies vector error correction model (VECM), generalized impulse response function (GIRF) and variance decomposition (VDC). In the long-run, the finding suggests evidence of bidirectional causality between financial development and economic growth using bank credit to private sector (BCP). When stock market variables are used, turnover ratio (TR) and value of shares traded (VT); both indicate unidirectional causality from economic growth to stock market development. The generalized Impulse response function and variance decomposition indicate that financial development contains some useful information in predicting the future path of economic growth.

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Bibliographic Info

Article provided by Africagrowth Institute in its journal African Finance Journal.

Volume (Year): 12 (2010)
Issue (Month): 2 ()
Pages: 72-92

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Handle: RePEc:afj:journl:v:12:y:2010:i:2:p:72-92

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Related research

Keywords: Vector autoregression; Economic growth; Stock markets; Banks;

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Cited by:
  1. Marques, Luís Miguel & Fuinhas, José Alberto & Marques, António Cardoso, 2012. "Interação entre o mercado acionista e o crescimento económico: Uma apreciação do caso português (1993-2010)
    [Interaction between the stock market and economic growth: An assessment of the Por
    ," MPRA Paper 39808, University Library of Munich, Germany.
  2. Shahbaz, Muhammad & Solarin, Sakiru Adebola & Mahmood, Haider & Arouri, Mohamed, 2013. "Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis," Economic Modelling, Elsevier, vol. 35(C), pages 145-152.
  3. Marques, Luís Miguel & Fuinhas, José Alberto & Marques, António Cardoso, 2013. "Does the stock market cause economic growth? Portuguese evidence of economic regime change," Economic Modelling, Elsevier, vol. 32(C), pages 316-324.
  4. Ndako, Umar Bida, 2013. "The Day of the Week effect on stock market returns and volatility: Evidence from Nigeria and South Africa," MPRA Paper 48076, University Library of Munich, Germany.

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