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Investigating the Causal Relationship Between Stock Market and Aggregate Economic Performance of South Africa


  • Eleanya K. Nduka

    (Centre for the Study of the Economies of Africa (CSEA), Abuja, Nigeria)

  • Ugochukwu E. Anigbogu

    (Department of Economics, University of Nigeria, Nsukka)

  • Ishaku R. Nyiputen

    (Department of Economics, Federal University, Wukari, Taraba, Nigeria)


Stock is one of the key securities traded in the capital markets and as such, has attracted the attention of researchers. While it is said to propel economic activities, empirical studies conducted on different countries present divergent outcomes. Thus, in this study we investigate the long-run and causal relationship between stock market and aggregate economic activities of South Africa using quarterly data from 1995Q1 to 2013Q4. We utilize the Augmented-Dickey Fuller (ADF) and Philips-Perron (PP)tests for unit root, the Johansen (1995) Maximum Likelihood cointegration technique and VEC Model. The study further employs Granger (1969) pair-wise causality test approach. It is noteworthy that the model variables have long-run relationship, but the causality test result suggests that non cause each other.

Suggested Citation

  • Eleanya K. Nduka & Ugochukwu E. Anigbogu & Ishaku R. Nyiputen, 2016. "Investigating the Causal Relationship Between Stock Market and Aggregate Economic Performance of South Africa," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(4), pages 218-227, April.
  • Handle: RePEc:asi:aeafrj:2016:p:218-227

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    References listed on IDEAS

    1. Charles Amo Yartey, 2008. "The Determinants of Stock Market Development in Emerging Economies; Is South Africa Different?," IMF Working Papers 08/32, International Monetary Fund.
    2. Levine, Ross, 1991. "Stock Markets, Growth, and Tax Policy," Journal of Finance, American Finance Association, vol. 46(4), pages 1445-1465, September.
    3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    4. Ugochukwu E. Anigbogu & Eleanya K. Nduka, 2014. "Stock Market Performance and Economic Growth: Evidence from Nigeria Employing Vector Error Correction Model Framework," The Economics and Finance Letters, Conscientia Beam, vol. 1(4), pages 90-103.
    5. Mohamed Jalloh, 2015. "Does Stock Market Capitalization Influences Economic Growth in Africa? : Evidence from Panel Data," Applied Economics and Finance, Redfame publishing, vol. 2(1), pages 91-101, February.
    6. 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.
    7. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
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