Title: Stock Market Development and Economic Growth: Preliminary Evidence from African Countries
Abstract: This study examines the relationship between stock market development and economic growth for nine African countries. Results suggest a positive relationship between several indicators of the stock market performance and economic growth. Thus they lend support both to the financial intermediation literature as well as to the traditional growth literature. Introduction As the global equity markets have experienced their most explosive growth over the past decade, emerging equity markets have experienced an even more rapid growth, taking on an increasingly larger share of this global boom. For example, while overall capitalization rose from $4.7 trillion to $15.2 trillion globally, the share of emerging markets jumped from less than 4 percent to 13 percent in this period. Trading activity in these markets surged equally fast: the value of shares traded in emerging markets climbed from less than 3 percent of the $1.6 trillion world total in 1985 to 17 percent of the $9.6 trillion shares traded in all world’s exchanges in 1994. Both the global boom and the involvement of the emerging markets in it, have attracted the interest of academics and policy makers. As a result, a plethora of studies now focus on how to measure the benefits of globally-diversified portfolios, while a large number of countries expound regulatory reforms to foster capital market development and attract foreign portfolio flows. Yet, there exists very little empirical evidence on the importance of stock market development to economic growth and almost none exists regarding the African countries. Theoretically, the traditional growth theory could not explore the relationship between financial intermediation and economic growth because it focused on steady-state level of capital stock per worker or productivity, but not on the rate of growth (which was attributed to exogenous technical progress).
Publication Year: 2001
Publication Date: 2001-01-01
Language: en
Type: article
Access and Citation
Cited By Count: 44
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot