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Financial Deepening in South Africa: Toward and Architecture that Stimulates Growth

Author

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  • Ashley G. Frank

    (University of KwaZulu-Natal)

Abstract

Theory suggests that financial liberalisation, through increasing investment as well as the average productivity of capital, stimulates economic growth. Since bank-based financial deepening is often problematic due to adverse selection and moral hazard effects, the establishment and expansion of capital markets has been advocated. This study examines the effect stock market expansion has had for South Africa’s economic development. A statistically significant negative relationship between stock market development and economic growth is found. The data suggests that the presence of thin trading prevents the theorized benefits of market development from accruing to the economy.

Suggested Citation

  • Ashley G. Frank, 2007. "Financial Deepening in South Africa: Toward and Architecture that Stimulates Growth," The African Finance Journal, Africagrowth Institute, vol. 9(2), pages 26-36.
    • Handle: RePEc:afj:journl:v:9:y:2007:i:2:p:26-36
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    Cited by:

    1. Chung-Hua Shen & Chien-Chiang Lee & Shyh-Wei Chen & Zixiong Xie, 2011. "Roles played by financial development in economic growth: application of the flexible regression model," Empirical Economics, Springer, vol. 41(1), pages 103-125, August.

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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