Stock Markets, Banks and Growth in Sub-Saharan Africa

Economic literature proposes stock market development and bank development as growth-inducing avenues. However, the long run and causal linkage between stock market development, bank development, and growth in SSA has not received much attention among scholars. This book provides some insights on the long run and causal relationship between stock market development, bank development and economic growth for a group of 13 selected SSA countries for the period 1990 - 2014. Using the Pedroni cointegration test, we established that stock markets and bank development do not have long run trends with economic growth for the selected SSA countries. To analyse the causal linkages, we conducted Wald tests after running system GMM regressions. We used the system GMM estimator since it realizes more efficiency than the difference GMM estimator. Using bank credit ratio as the measure of bank development, we found no evidence of causality in any direction between stock market development, bank development and growth. Further, we established no causality between bank development and stock market development.