Links between stock market development and key economic growth variables : the case of selected African countries

[摘要] ENGLISH ABSTRACT: This thesis is a collection of eight essays on links between stock market development andeconomic growth in selected African countries. In the first essay an overall index ofstock market development shows that South Africa, Mauritius, Zimbabwe, Morocco andthe BRVM in Cote d'Ivoire have the most developed stock markets in terms of marketsize, liquidity and transactions cost indicators. However, Nigeria and Egypt also emergewhen institutional development is considered. Ghana, Malawi and Namibia have theleast developed stock markets. Results from the second essay on stock markets andgrowth show a positive relationship between stock market development and economicgrowth. This positive influence is significant for countries classified as upper-middleincomeeconomies. On the basis of market capitalization groupings, stock marketdevelopments play a significant role in growth only for moderately capitalized markets.Form the third essay exchange rate depreciation in the long-run leads to increases instock market returns in Tunisia. Exchange rate movement leads to stock market returnsin Egypt, while stock market returns lead to exchange rate movement in Kenya andMauritius. Shocks induced by either stock market returns or exchange rate changes aremore protracted in Ghana, Kenya, Mauritius and Nigeria than in South Africa andEgypt. Cointegration analysis in the fourth essay reveals a negative relationship betweeninflation and stock market prices for three out of seven countries: Egypt, Mauritius andSouth Africa. Short-run models for these countries show a negative response of stockreturns to instantaneous change in inflation. In Ghana, Kenya, Nigeria and Tunisia,where cointegration is absent, there is unidirectional causality from inflation to stockreturns for Ghana, bidirectional causality between inflation and stock returns for Kenya,and no significant results for Nigeria and Tunisia.Results from the fifth essay show that investment in the selected countries growssignificantly with an increase in stock market returns. Even without the inclusion ofSouth Africa in the panel, stock market returns in the other relatively less developedAfrican economies impact positively on investment growth. Cointegration tests from thesixth essay indicate a long-run relationship between interest rate and stock prices forKenya and South Africa. In the short-run there is unidirectional causality from stock returns to interest rate in Kenya and bidirectional causality in South Africa. Responses toshocks have long-lasting effects in Egypt, Ghana, Nigeria and Tunisia and are short-livedin Mauritius.The seventh essay shows that countries with more developed stock markets (Coted'Ivoire, South Africa, Mauritius, Tunisia and Morocco), have the most developedfinancial intermediation system. There is evidence from correlation analysis ofcomplementarity between stock market development and bank developments in theselected countries. Finally from the eighth essay two long-run stable cointegrationrelations are found, one hinging on a larger market (South Africa) and the other on asmaller market (Ghana). The short-run error correction framework shows significantfeedback and causal effects both ways from smaller to larger markets.

[发布机构] Stellenbosch University