Abstract
It is argued that the stock market development is an important ingredient for growth. As such this study tries to bring a small contribution by analysing the impact of stock market development on economic growth in Mauritius. A time series approach is conducted over the period of 1989 to 2011. Both the long run and short run relationship are analyzed by using the Autoregressive Distributed Lag (ARDL) approach and the Error Correction Model (ECM) respectively. Two measures of stock market development are used, namely the liquidity and size ratios. This study finds that there is no statistically significant relationship between the stock market development and economic growth in Mauritius, where the plausible explanation can be mainly attributable to the youthfulness of the stock exchange of Mauritius (SEM), as compared to other countries. Furthermore, a Granger causality test is performed to the variables integrated at order one (I (1)). A bidirectional causality was established between Size and economic growth while no causality was established between total value of shares traded ratio and economic growth.
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