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Stock Market and Economic Growth in Ghana, Kenya and Nigeria

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  • Ifuero Osad Osamwonyi
  • Abudu Kasimu

Abstract

In the paper, we examine the causal relationship and the direction of causality between stock market development and economic growth in Ghana, Kenya and Nigeria. In examining the causal relationship and the direction of causality, we used the Granger Causality test procedure as developed in Granger. The study regressed five indicators of stock market namely stock market capitalization (MC), stock turnover ratio (STO), stock traded value (TVL), number of listed securities (LS), and stock market index (MI) against the real gross domestic product (GDP) which is used as a proxy for economic growth. Using the 1989 ¨C 2009 data sets, the empirical findings of the study show that there is no causal relationship between stock market development and economic growth in Ghana and Nigeria, but revealed a bidirectional causal relationship between stock market development and economic growth in Kenya. When MC was used as a proxy for stock market development, MC and LS were found to Granger cause economic growth. Bidirectional causality was found between STO and GDP. TVL was found to have a strong negative effect on GDP. Based on the results of the study, we recommend that policy makers and regulatory bodies should formulate and implement policies that will attract investors and avail the real sector of the economy the much needed fund for production and encourage listing of companies that contribute largely to GDP in the nation stock exchange.

Suggested Citation

  • Ifuero Osad Osamwonyi & Abudu Kasimu, 2013. "Stock Market and Economic Growth in Ghana, Kenya and Nigeria," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 4(2), pages 83-98, April.
    • Handle: RePEc:jfr:ijfr11:v:4:y:2013:i:2:p:83-98
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    2. Tomader Elhassan & Bakhita Braima, 2020. "Impact of Khartoum Stock Exchange Market Performance on Economic Growth: An Autoregressive Distributed Lag ARDL Bounds Testing Model," Economies, MDPI, vol. 8(4), pages 1-16, October.
    3. Udo Ginikachi Cynthia & Nwezeaku Nathaniel Chinedum & Kanu Success Ikechi, 2021. "Effects of Capital Market Development on the Economic Growth of Nigeria," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 7(2), pages 30-46, June.
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    5. Daniel Agyapong, 2014. "Stock Market Integration in West African Monetary Zone: A Linear and Nonlinear Cointegration Approach," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(5), pages 563-587, May.
    6. Samuel Antwi & Mohammed Issah & Richard Kpodo, 2021. "Stock market and economic growth nexus in Ghana," Bulletin of Applied Economics, Risk Market Journals, vol. 8(2), pages 57-73.
    7. Fisayo Fagbemi & John Oluwasegun Ajibike, 2022. "West African Emerging Economies: Comparative Insights on Ghana’s and Nigeria’s Stock Market Development," American Journal of Economics and Business Administration, Science Publications, vol. 14(1), pages 55-67, December.
    8. Maku Affor Owen, 2020. "Stock Market Development and Economic Growth: Empirical Evidence From an Institutional Impaired Economy," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 496-509, October.
    9. Yilmaz Bayar & Abdulkadir Kaya & Murat Yildirim, 2014. "Effects of Stock Market Development on Economic Growth: Evidence from Turkey," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(1), pages 93-100, January.
    10. Oseni, Isiaq & Akpa, Emeka & Aberu, Felix, 2018. "Does Stock Market impact on the Growth of Nigerian Economy using 3SLS Analysis?," MPRA Paper 92285, University Library of Munich, Germany.
    11. Polat, Ali & Shahbaz, Muhammad & Ur Rehman, Ijaz & Satti, Saqlain Latif, 2013. "Revisiting Linkages between Financial Development, Trade Openness and Economic Growth in South Africa: Fresh Evidence from Combined Cointegration Test," MPRA Paper 51724, University Library of Munich, Germany, revised 25 Nov 2013.

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