scholarly journals Financial Intermediaries Versus Financial Markets: A South African Experience

2011 ◽  
Vol 10 (2) ◽  
Author(s):  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Stock Market ◽  
Causal Relationship ◽  
Financial Development ◽  
Financial Sector ◽  
Market Development ◽  
Stock Market Development ◽  
African Experience ◽  
Causality Model

In this paper, a dynamic causal relationship between stock market development, bank-based financial development and economic growth in South Africa is examined during the period 1980:1-2007:3, using a trivariate Granger causality model. The study attempts to answer two critical questions. Does financial sector development Granger cause economic growth? Which sector leads in the process of financial development in South Africa – bank-based sector or stock market sector? Using a cointegration-based error-correction mechanism, the empirical results reveal that there is a distinct unidirectional causal flow from stock market development to bank development. The results also indicate that there is a bi-directional causal relationship between stock market development and economic growth.  Similar results were also found on the causality between bank-based financial development and economic growth. The study, therefore, concludes that whilst both financial development and economic growth Granger cause each other, the development of the financial sector in South Africa is largely driven by the stock market activities.

scholarly journals Capital market development and economic growth: Empirical evidence from South Africa

2011 ◽  
Vol 8 (2) ◽  
pp. 217-226 ◽  
Author(s):  
Nicholas Odhiambo
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Stock Market ◽  
Causal Relationship ◽  
Testing Procedure ◽  
Market Development ◽  
Bounds Testing ◽  
Stock Market Development ◽  
Real Gdp Per Capita ◽  
Market Capitalisation

In this paper, the dynamic causal relationship between stock market development and economic growth in South Africa is examined – using the newly developed ARDL-Bounds testing procedure. The study uses three proxies of stock market development, namely stock market capitalisation, stock market traded value and stock market turnover, against real GDP per capita, a proxy for economic growth. Using the 1971-2007 data sets, the empirical results of this study show that the causal relationship between stock market development and economic growth is sensitive to the proxy used for measuring the stock market development. When the stock market capitalisation is used as a proxy for stock market development, the economic growth is found to Granger-cause stock market development. However, when the stock market traded value and the stock market turnover are used, the stock market development seems to Granger-cause economic growth. Overall, the study finds the causal flow from stock market development to economic growth to predominate. The results apply irrespective of whether the causality is estimated in the short-run or in the long-run.

scholarly journals Financial development, openness in financial services trade and economic growth

2019 ◽  
Vol 3 (2) ◽  
pp. 42-65 ◽  
Author(s):  
Rabia Khatun ◽  
Jagadish Prasad Bist
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Financial Development ◽  
Financial Services ◽  
Banking Sector ◽  
Market Development ◽  
Services Trade ◽  
Content Type ◽  
Stock Market Development ◽  
Insurance Sector

Purpose The purpose of this paper is to examine the relationship between financial development, openness in financial services trade and economic growth in BRICS countries for the period 1990–2012. Design/methodology/approach An index for financial development has been constructed using principal component analysis technique by including banking sector development, stock market development, bond market development and insurance sector development. For the robustness of the result, the long-run cointegrating relationship amongst the variables has been analyzed. Findings Overall financial development has a positive and significant impact on economic growth. To take the full advantage of openness in financial services trade, countries need to put more emphasis on the development of their stock markets, bond markets and the insurance sector. The result shows that openness in financial services trade has a positive impact on economic growth when the stock market, bond market and insurance sector are included in the system. Research limitations/implications The policy implication of the findings is that policymakers should focus more on developing all four areas of finance to get the full benefit of the financial system on the process of economic growth. Originality/value The authors have constructed the better indicators of financial development in the case of BRICS economies. Most of the studies in BRICS economies have measured the development of the financial sector as either banking sector development or stock market development. However, the present study includes all four areas of finance (banking sector development, stock market development, insurance sector development and bond market development) into account.

scholarly journals Financial development and economic growth: panel evidence from BRICS

2019 ◽  
Vol 24 (47) ◽  
pp. 113-126 ◽  
Author(s):  
Biplab Kumar Guru ◽  
Inder Sekhar Yadav
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Financial Development ◽  
Banking Sector ◽  
Market Development ◽  
Content Type ◽  
Stock Market Development ◽  
Development Indicators ◽  
Banking Sector Development ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between financial development and economic growth for five major emerging economies: Brazil, Russia, India, China and South (BRICS) during 1993 to 2014 using banking sector and stock market development indicators. Design/methodology/approach To begin with, the study first examined some of the principal indicators of financial development and macroeconomic variables of the selected economies. Next, using generalized method of moment system estimation (SYS-GMM), the relationship between financial development and growth is investigated. The banking sector development indicators used in the study include size of the financial intermediaries, credit to deposit ratio (CDR) and domestic credit to private sector (CPS), whereas the stock market development indicators are value of shares traded and turnover ratio. Also, some macroeconomic control variables such as inflation, exports and the enrolment in secondary education were used. Findings The examination of the principal indicators of financial development and macroeconomic variables have shown considerable differences between the selected economies. Results from the dynamic one-step SYS-GMM estimates confirm that in presence of turnover ratio, all the selected banking development indicators such as size of financial intermediaries, CDR and CPS are positively significantly determining economic growth. Similarly, in presence of all the selected banking sector development indicators, value of shares traded is found to be positively significantly associated with economic growth. However, the same is not true when turnover ratio is regressed in presence of banking sector variables. Overall, the evidence suggests that banking sector development and stock market development indicators are complementary to each other in stimulating economic growth. Practical implications A positive association between financial development and growth indicates that the policymakers should take necessary measures toward simultaneous development of both banking sector as well as stock market for inducing growth. Originality/value The present paper attempts to examine the relationship between financial development and growth using both banking sector and stock market development indicators which has not been attempted before for BRICS. Also, most of the existing studies are found in case of developed economies. This paper tries to fill this void by studying five major emerging economies.

scholarly journals Stock market development and economic growth in developing countries: Evidence from Saudi Arabia

2014 ◽  
Vol 11 (3) ◽  
pp. 193-216 ◽  
Author(s):  
Meshaal J. Alshammary
Keyword(s):  
Economic Growth ◽  
Saudi Arabia ◽  
Stock Market ◽  
Causal Relationship ◽  
Listed Companies ◽  
Market Development ◽  
Stock Market Volatility ◽  
Stock Market Development ◽  
Wide Range

This study investigates the long-term and short-term relationships between stock market development and economic growth in the Kingdom of Saudi Arabia (KSA) for the period from January 1993 to December 2009. It employs a wide range of vector autoregression (VAR) models to evaluate the importance and impact of stock market development on economic growth. We used real GDP growth rates as a proxy for economic growth and the stock market index (SMI) as a proxy for the stock market development. The vector-error cointegration model (VECM) indicates a significant long-term causal relationship between economic growth and the stock market development. Granger causality tests show weak bidirectional causal relationship between stock market development and economic growth supporting the feedback view in the short run. The study implications are as follows. Firstly, investment in real economic activities leads to economic growth. Secondly, the stock market might hinder economic growth due to its volatile and international risk sharing nature, low free-floating share ratio, number of listed companies and the domination of Saudi Individual Stock Trades (SIST) characteristics. Thirdly, policymakers should seek to minimise stock market volatility and fluctuations, increase both the free-floating share ratio and number of listed companies and shift investment domination toward corporate investors by considering its effect on economic growth when formulating economic policies.

Stock Market Development And Economic Growth in Nigeria

1998 ◽  
Vol 2 (1) ◽  
pp. 33-38 ◽  
Author(s):  
John C. Anyanwu
Keyword(s):  
Economic Growth ◽  
Risk Management ◽  
Stock Market ◽  
Conceptual Framework ◽  
Corporate Control ◽  
Market Development ◽  
Political Environment ◽  
Stock Market Development ◽  
Long Run

Is the stock market development important for economic growth in Nigeria? One line of research argues that it is not; another line stresses the importance of stock market development in allocating capital, acquisition of information about firms, easing risk management, mobilization of savings, and exerting corporate control. Indeed, some theories provide a conceptual framework for the belief that larger, more efficient stock markets boost economic growth. This article examines whether there is a strong empirical association between Nigerian stock market development and long-run economic growth. Our empirical results suggest that the Nigerian stock market development is positively and strongly associated with long-term economic growth. This implies that Nigerian policymakers should make concerted efforts at removing obstacles to stock market development while creating and sustaining an enabling macroeconomic and political environment for the market’s development.

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