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The Dynamic Linkage between Money Market, Capital Market and Economic Growth in Ghana: New Lessons Relearned

Author

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  • Isaac Azubuike Ogbuji

    (Department of Finance, University of Lagos, Nigeria)

  • Ekundayo Peter Mesagan

    (School of Management and Social Sciences, Pan-Atlantic University, Nigeria)

  • Yasiru Olorunfemi Alimi

    (Department of Economics, Lead City University, Nigeria)

Abstract

This study is a comparative analysis of the effects of money and capital markets on the Ghanaian economy covering the period from 1991 to 2017 using the dynamic Auto Regressive Distributed Lag (ARDL) framework. Empirical results confirmed the existence of a unique and stable long-run relationship between the money market, capital market and economic growth. In respect of money market indicators, findings confirmed that monetary policy and treasury bills rate have had negative but significant impact on growth in the short- and long-run respectively. More so, total liquidity negatively and significantly influenced the Ghanaian economy both in the short- and in the long run. Both market capitalization and total value of stock traded, as proxies of capital market, had positive and significant effects on short-run growth, while both indicators as well as stock market turnover negatively and insignificantly affected long-run growth. This means that capital market exerts a short-run impact on the country's economy, while money market exerts both short- and long-run impacts. The lesson relearned is that the money market propels the Ghanaian economy better than the capital market.

Suggested Citation

  • Isaac Azubuike Ogbuji & Ekundayo Peter Mesagan & Yasiru Olorunfemi Alimi, 2020. "The Dynamic Linkage between Money Market, Capital Market and Economic Growth in Ghana: New Lessons Relearned," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 5(2), pages 59-78, December.
    • Handle: RePEc:sgh:erfinj:v:5:y:2020:i:2:p:59-78
    DOI: 10.2478/erfin-2020-0004
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    References listed on IDEAS

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    2. Mesagan, Ekundayo Peter & Olunkwa, Chidi Ndubuisi, 2022. "Heterogeneous analysis of energy consumption, financial development, and pollution in Africa: The relevance of regulatory quality," Utilities Policy, Elsevier, vol. 74(C).
    3. Ismaila Akanni Yusuf & Agatha Nkem Amadi & Mohammed Bashir Salaudeen, 2020. "Effects of Risk Culture and Appetite on Effective Risk Management in Nigerian Banks: Case Study of United Bank for Africa Plc," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(2), pages 81-87, June.
    4. Ekundayo Peter Mesagan & Xuan Vinh Vo & Precious Muhammed Emmanuel, 2023. "The technological role in the growth-enhancing financial development: evidence from African nations," Economic Change and Restructuring, Springer, vol. 56(1), pages 657-680, February.
    5. Mesagan, Ekundayo Peter & Charles, Ayobola Olufolake & Vo, Xuan Vinh, 2023. "The relevance of resource wealth in output growth and industrial development in Africa," Resources Policy, Elsevier, vol. 82(C).
    6. Yusuf, Ismaila Akanni & Salaudeen, Mohammed Bashir & Agbonrofo, Hope, 2021. "Social and Economic Drivers of Stock Market Performance in Nigeria," MPRA Paper 111086, University Library of Munich, Germany.
    7. Olukunle Samuel Olaniran & Olusola Olakunle Ogunjinmi, 2022. "Modelling the Impacts of Agricultural Outputs and its Components on Human Mortality Rate in Nigeria," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 11(1), pages 146-160, January.

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    More about this item

    Keywords

    Financial Development; Money Market; Capital Market; Economic Growth;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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