توسعه بورس سهام و ارز و رشد اقتصادی: شواهدی از هفت کشور آفریقای سیاه

The paper examines the long run and causal relationship between stock market development and economic growth for seven countries in sub-Saharan Africa. Using the autoregressive distributed lag (ARDL) bounds test, the study finds that the stock market development is cointegrated with economic growth in Egypt and South Africa. Moreover, this test suggests that stock market development has a significant positive long run impact on economic growth. Granger causality test based on vector error correction model (VECM) further shows that stock market development Granger causes economic growth in Egypt and South Africa. However, Granger causality in the context of VAR shows evidence of bidirectional relationship between stock market development and economic growth for Cote D’Ivoire, Kenya, Morocco and Zimbabwe. In Nigeria, there is a weak evidence of growth-led finance using market size as indicator of stock market development. Based on these results, the paper argues that stock markets could help promote growth in Africa. However, to achieve this goal, African stock markets need to be further developed through appropriate regulatory and macroeconomic policies.

The relationship between financial development and economic growth has been debated quite extensively in the literature, yet the direction of causality relationship remains unresolved. The debate has focused on whether financial development causes economic growth or economic growth causes financial development or whether a two-way relationship exists. While some studies found a unidirectional causality running from financial development to economic growth; others reported the obverse. Few other studies found evidence of bidirectional relationship while a handful provided evidence of neutrality of finance and economic growth1. However, the general observation from the literature is that most studies on the causal relationship between financial development and economic growth have focused on developed economies. Although few studies, based exclusively on African data, exist on the finance–economic growth puzzle, none has considered the relationship between the stock market of financial development and economic growth. For most of the studies on stock markets in Africa, the emphasis has been on testing for market efficiency, development of the stock markets and the impact of economic variables on stock markets2. Moreover, none of the known existing studies have used the autoregressive distributed lags (ARDL) bounds test in examining the causal relationship between stock market development and economic growth3. Hence, the objective of this paper is to investigate the cointegration and causality relationships between stock markets development and economic growth using the ARDL bounds test and the Granger causality (GC) test based on vector error correction model (VECM). The paper contributes to empirical literature in many ways. First, it investigates the long run link between stock markets and economic growth focusing exclusively on Africa. This is important considering the characteristics of the African stock markets. They are relatively recent in origin, small by world standards and faced with low price earnings multiplier as well as inadequate regulatory framework. Secondly, the application of the ARDL and the GC test based on VECM is an innovation that helps to obviate the problem associated with the estimation of short time series data. The structure of the paper is organized as follows. Section 2 provides a brief summary of theoretical and empirical issues on relationships between stock markets and economic growth. Section 3 gives the methodology adopted in the work. Section 4 provides the discussion of the results. The last section contains the concluding remarks.

The paper investigates the long run and causal relationship between stock market development and economic growth for seven African countries using the ARDL bounds test and Granger causality test within the context of VECM framework. Long run cointegrating relationship between the series could be detected only for two countries Egypt and South Africa, while causality for the seven countries. Granger causality test within the VECM framework shows unidirectional relations running from stock market development to economic growth. However, Granger causality within VAR framework shows short run bidirectional causality between stock market development and economic growth. In the case of Nigeria, a weak evidence of unidirectional causality running from economic growth to stock market development was found. What lessons can be drawn from these results? One, in countries where bidirectional Granger causality or feedback between stock market development and economic growth was found, policies designed to enhance efficiency of the stock markets and economic growth will be mutually beneficial. Such policies could entail consolidation and improvement on current growth and investment patterns in these economies to infuse higher demand for capital market activities which in turn will engender economic growth. However, the bidirectional causality found in some of these selected countries calls for caution in the use of single equations regressions of income on financial development for making econometric forecasts. In countries where evidence shows unidirectional granger causality running from stock market development to economic growth, policies formulated to enhance higher demand for capital market activities will lead to increase economic growth. Also, policies designed to enhance efficiency of the stock markets will possibly lead to increase in economic growth. However, in country where Granger causality runs from economic growth to stock market, policies designed to enhance growth will lead to improvement in stock market development. In general, the evidence from the study suggests that policy makers in the continent should encourage stock market development through appropriate mix of taxes, legal and regulatory policies to remove barriers to stock market operation and thus enhance their efficiency. Moreover, appropriate mix of policies to encourage savings and investment might infuse higher demand for capital market activities and engender greater integration of African stock markets into the economies. Finally, it is important to note that the reasons advanced for the different directions of causality in our work are only suggestive. Hence, ascertaining and finding those factors that help to explain the disparity is no doubt another line of inquiry that will help us understand better the relationship between stock markets and economic growth.