Capital Market and Economic Development: A Comparative Study of Three Sub-Saharan African Emerging Economies

Abstract

The study is undertaken with the objective of examining the relationship between capital market and economic development in emerging African economies. The study adopted an ex-post facto research design for Nigeria, South Africa and Kenya and the variables used were Human Development Index (HDI) as the dependent variable, Stock Market Capitalization (SMC); Value of Stock Traded (VST); Stock Market Turnover Ratio (TR) as independent variable. Moreover, the period under study was from 1990 to 2018 and the data collected within the period were analysed using descriptive statistics, ARDL regression, granger causality and Ordinary Least Square (OLS) for the comparative single country regression analysis. The study empirically proves that capital market has a significant relationship with economic development in the selected emerging Africa economies in Nigeria and South Africa except for Kenya which conforms with the Finance Led Growth Hypothesis Theory. We recommend that Governments of Sub-Saharan African economies should formulate and implement policies that will ensure relative stability in the market-based stock market of the economy to foster capital formation, increase investment and ensure stability in the financial system.

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