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Banks, Stock Market Development and Economic Growth in Kenya: An Empirical Investigation

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  • Sheilla Nyasha
  • Nicholas M. Odhiambo

Abstract

In this paper, we have examined the impact of both bank- and market-based financial development on economic growth in Kenya during the period 1980 to 2012, using the autoregressive distributed lag bounds testing approach. To capture as far as possible the breadth and depth of the Kenyan bank- and market-based financial systems, the study employs the method of means-removed average to construct both bank- and market-based financial development indices from an array of banking sector and stock market variables. The empirical results of this study show that market-based financial development has a positive impact on economic growth in Kenya. However, the results have also shown that bank-based financial development has no impact on economic growth in the study country. These results apply irrespective of whether the regression analysis is conducted in the long run or in the short run. The findings of this study, therefore, lend more support to pro-market-based financial development policies in Kenya.

Suggested Citation

  • Sheilla Nyasha & Nicholas M. Odhiambo, 2017. "Banks, Stock Market Development and Economic Growth in Kenya: An Empirical Investigation," Journal of African Business, Taylor & Francis Journals, vol. 18(1), pages 1-23, January.
  • Handle: RePEc:taf:wjabxx:v:18:y:2017:i:1:p:1-23
    DOI: 10.1080/15228916.2016.1216232
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    Cited by:

    1. Simplice Asongu & Jules R. Minkoua N, 2017. "Dynamic Openness and Finance in Africa," Working Papers 17/040, African Governance and Development Institute..
    2. Andrew Phiri, 2017. "The Unemployment-Stock Market Relationship in South Africa: Evidence from Symmetric and Asymmetric Cointegration Models," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 15(3 (Fall)), pages 231-254.
    3. Andrew Phiri, 2018. "Has the South African Reserve Bank responded to equity returns since the sub-prime crisis? An asymmetric convergence approach," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 10(3), pages 205-225.
    4. repec:rej:journl:v:19:y:2016:i:61:p:211-226 is not listed on IDEAS

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