Determinants of Stock Market Development in Sub-Saharan Africa

Abstract

The objective of this study is to investigate the determinants of stock market development in Sub-Saharan Africa. For this purpose, nine stock markets in the region were studied and market capitalization as a percentage of GDP was used as an indicator of stock market development. To achieve the objective, a Vector Auto-Regression Model (VAR) in the Panel was used to account for the interdependence between the stock market, economic growth and the banking market. The results revealed that the economic growth rate, delayed market capitalization by one lag, money supply as a percentage of GDP, inflation rate, stock market turnover rate and the degree of trade openness are the determinant of stock market development in Sub-Saharan Africa. Moreover, the study showed that there is a mutual causality between the three spheres: stock market, banking market and economic growth.(original abstract)