Article abstract

Journal of Economics and International Business Management

Research Article | Published July 2018 | Volume 6, Issue 2, pp. 20-29.

doi: https://doi.org/10.33495/jeibm_v6i2.17.115

 

Stock market and economic growth: Evidence from Granger causality test

 


 

 

Tan Zhongming

Koomson Prince*

Ding Guoping

Chibsah Rahmatu

Obu Linda

 

Email Author

 

Department of Finance, School of Applied Economics, Jiangsu University, No. 310 Xuefu Road, Zhenjian 212013 Pr China.


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Citation: Zhongming T, Prince K, Guoping D, Rahmatu C, Linda O (2018). Stock market and economic growth: Evidence from Granger causality test. J. Econ. Int. Bus. Manage. 6(1): 20-29.

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 Abstract 


This study is aimed at determining the contributions of the Ghana stock market to the economic growth in Ghana from 1993 to 2015. This is necessitated by the concern as to whether a lean stock market like that of GSE with an average of 32 listed companies (within the period of study) with an average market capitalisation of 7.66% of GDP can significantly exert the much expected positive impact on total output. Four explanatory variables were specified for this study based on theoretical underpinning. Stationarity test was conducted using Augmented Dickey Fuller unit root test, whiles Johansen Cointegration test was used to estimate the long-run equilibrium relationship among the variables. The Granger causality test was conducted in order to establish causal relationship. Emirical test results shows that there is a bidirectional causality between economic growth (RGDP) and market capitalization of listed companies, whereas there is unidirectional causality between economic growth (RGDP) and stock turnover ratio, also, there is bidirectional causality between economic growth (RGDP) and market capitalization of listed companies, it was revealed that, there exist bidirectional causality between economic growth (RGDP) and the stock traded, there is an unidirectional causality between economic growth (RGDP) and number of listed companies on the exchange. From the analysis it was brought to light that there is apossitve relationship between the variables identified and Real Gross Domestic Product but this effect will be evident in the long term in the economy of Ghana. he study recommends that the government should restore confidence to the market through regulatory authorities by ensuring transparency, fair trading transactions and improve the market capitalization by encouraging more foreign investors to participate in the market and also to increase investment instruments such as derivatives, convertibles, swap and option in the market.

Keywords  Ghana Stock Exchange   capital market   economic growth and cointegration   economic growth  

 

 

Copyright © 2018 Author(s) retain the copyright of this article.

This article is published under the terms of the Creative Commons Attribution License 4.0

 

 

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