Stock market and economic growth nexus in Ghana

Abstract

The aim of this study is to determine the role of monetary policy on the stock market and economic growth nexus in Ghana. The study used annual time series macroeconomic and stock market data from the year 1990 to 2019. Secondary data was collected on Gross Domestic Product (GDP), market capitalization (MC), Commercial bank (CB), inflation (INF), labour (L), capital stock (K), and trade openness (TO). Inflation was measured with consumer price index (CPI), and broad money (M2) were examined. The ARDL cointegration bounce test approach was used. It was revealed that stock market development has a significant positive effect on economic growth both in the short and long run. The study also found a support for a positive and significant nexus between monetary policy and economic growth. Based on the results it is suggested that efforts must be mounted to increase the number of firms to be listed to promote liquidity and raise the size of the market via capitalization ratio.

Assessment of financial system and economic growth: An empirical evidence from Ghanas stock market

“…This discovery conforms with the findings of Bhattacharya et al, (2019). However, the result disagrees with the findings of Min et al (2018) and Antwi et al (2021), who found the efficiency of a financial market to predict economic growth. Again, the depth of Ghana's stock market does not cause economic growth, and the null hypothesis is accepted due to a p-value of 0.121.…”

“…The use of multi-proxies to measure the financial system is motivated by the literature, and studies assert that defining a single appropriate variable for financial system development is a daunting task faced by empirical studies (Türsoy and Faisal, 2018;Koçoğlu and C hang r, 2021;Kuranchie-Pong and Forson, 2022). In addition, the measuring construct for financial system stability is stock price volatility (Antwi et al, 2021), while the dependent variable, economic growth, is measured by GDP per capita annual growth, as used by Barradas (2020). The multidimensional measure gives a comprehensive and broad assessment of the financial system development encompassing depth, efficiency, and volatility (Beck and Cull, 2013).…”

“…The dynamic shocks in Ghana's financial system development tend to have short-run and long-run effects on the country's economic growth (Ibrahim and Alagidede, 2020). Besides, the government's policy decisions, such as monetary policy, have a significant positive impact on Ghana's stock market and influence economic growth (Antwi et al, 2021). A critical analysis of literature across continents and countries shows that the extent of the financial system's impact on economic growth is determined by the choices of the variables used in the measurement of economic growth and the proxy of the financial system, thus, resulting in different findings (Adu et al, 2013;Alexiou et al, 2018).…”

“…A critical analysis of literature across continents and countries shows that the extent of the financial system's impact on economic growth is determined by the choices of the variables used in the measurement of economic growth and the proxy of the financial system, thus, resulting in different findings (Adu et al, 2013;Alexiou et al, 2018). As an element that determines economic growth, the financial system has been measured as domestic credit (Mishra and Narayan, 2015;Prochniak and Wasiak, 2017), bank nonperforming loans, and market capitalization (Prochniak and Wasiak, 2017;Antwi et al, 2021). In almost all these empirical studies, economic growth is measured by Gross Domestic Product (GDP).…”