Enabling stock market development in Africa: A review of the macroeconomic drivers
-
DOIhttp://dx.doi.org/10.21511/imfi.18(1).2021.29
-
Article InfoVolume 18 2021, Issue #1, pp. 357-364
- Cited by
- 964 Views
-
491 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Africa has underdeveloped stock markets that have failed to meet the continent’s capital needs, such as rapid economic growth. This research analyzes the key drivers of stock market development in Africa from a macroeconomic perspective. The study examines several macroeconomic variables, including credit to the private sector, foreign direct investment, external reserves, money supply, external trade, per capita GDP, inflation, and lending rate to explain stock market development in Africa. The study builds a panel data consisting of eight African countries from 1994 to 2018 and applies the pooled mean group estimation technique. The analysis shows that in the long run, credit to the private sector, external reserves, and inflation are the most important factors that influence stock market development, while in the short run, income and trade openness are significant in explaining stock market development in Africa. The study recommends that policies to develop African stock markets should center on developing the private sector through access to credit, increased per capita income, and effective foreign reserve management to boost local and foreign investors’ confidence.
- Keywords
-
JEL Classification (Paper profile tab)A11, D53, E44, G15
-
References21
-
Tables2
-
Figures0
-
- Table 1. Pooled mean group estimator result
- Table 2. Country-specific pooled mean group estimator short-run result
-
- Agyapong, D., & Badjabeng, K. A. (2018). External Debt Stock, Foreign Direct Investment and Financial Development Evidence from African Economies. Journal of Asian Business and Economic Studies, 27(1), 81-98.
- Ayaydın, H., Hayaloğlu, P., & Baltacı, N. (2013). Hisse Senedi Piyasasının Gelişmesinin Makroekonomikve Kurumsal Belirleyicileri Üzerine Bir Araştırma: Panel Veri Analizi. The Journal of Academic Social Science Studies, 6(4).
- Balogun, W. O., Dahalan, J. B., & Hassan, S. B. (2016). Stock Market Development, Liberalisation and Financial Development in the Selected Sub-Saharan African Countries. Romanian Economic and Business Review, 11(2).
- Bayar, Y. (2016). Macroeconomic Determinants of Stock Market Development: Evidence from Borsa, Istanbul. Financial Studies, 1.
- Bello, H. T., Ayadi, F., Osabuohien, E. S., Ejemeyovwi, J. O., & Okafor, V. (2020). Economic Analysis of Growth Finance and Liquid Liabilities in Nigeria. Investment Management and Financial Innovations, 17(3), 387-396.
- Billmeier, A., & Massa, I. (2009). What Drives Stock Market Development in Emerging Markets: Institutions, Remittances or Natural Resources? Emerging Markets Review, 10.
- Calderon-Rossell, R. J. (1991). The Determinants of Stock Market Growth. In S. Ghon Rhee & Rosita P. Chang (Eds.), Pacific Basin Capital Markets Research Proceeding. Bangkok-Thailand: Second Annual Pacific Basin Finance Conference.
- Ejemeyovwi, J. O., Osabuohien, E. S., & Osabuohien, R. (2018). Investment in Technology and Human Capital Development in ECOWAS International Journal Economics and Business Research, 15(4), 463-474.
- Ejemeyovwi, J. O. Osabuohien, E. S. Bowale, E. K. Abuh, O., Adedoyin, J. P., & Ayanda, B. (2019). Information and Communication Technology Adoption and Innovation for Sustainable Entrepreneurship. Journal of Physics: Conference Series, 1378(2), 022085.
- Jamaludin, C. N., Ismail, S., & Manaf, S. A. (2017). Macroeconomic Variables and Stock Market Returns: Panel Analysis from Selected ASEAN Countries. International Journal of Economics and Financial Issues, 7(1).
- Kabuga, N. A. (2018). Budget Deficits and Stock Market Performance in Selected African Countries: A Dynamic Panel Estimation Approach. UMYUK Journal of Economics and Development (UJED), 1(1).
- Khan, S. (2017). Macroeconomic Determinants of Stock market Development of South Asian Countries (MSc Thesis). Capital University of Science and Technology, Islamabad.
- Matadeen, S. J. (2017). The Macroeconomic Determinants of Stock Market Development from an African Perspective. Theoretical Economics, 7.
- Mroua, M., & Trabelsi, L. (2019). Causality and Dynamic Relationships Between Exchange Rate and Stock Market Indices in BRICS Countries. Panel/GMM and ARDL Analyses. Journal of Economics, Finance and Administrative Science, 1.
- Nasimi, R. N., Nasimi, A. N., & Khurshid, S. (2018). Stock Returns Under Political and Macroeconomic Instabilities: An Empirical Analysis from United Kingdom. Research Journal of Finance and Accounting, 9(15).
- Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panels. Journal of the American Statistical Association, 94(446).
- Rasiah, R., Habibullah, M., & Hamid, B. (2017). A Dynamic Heterogeneous Panel Estimation of the Impact of Income, Inflation and Happiness on Stock Returns. Global Economy and Finance Journal, 9(1).
- Tsaurai, K. (2018). What are the Determinants of Stock Market Development in Emerging Markets? Academy of Accounting and Financial Studies Journal, 22(2).
- World Bank. (2020). World Development Indicators.
- World Federation of Exchanges. (2018). The Role of Stock Exchanges in Fostering Economic Growth and Sustainable Development (UNCTAD World Investment Report, 2017).
- World Federation of Exchanges. (2018). What Attracts International Investors to Emerging Markets.