Abstract

PurposeThis study investigated the interactive impact of global and domestic stock market variables on the depth of the financial system in Sub-Saharan African (SSA) countries from 1990 to 2018.Design/methodology/approachThe study used the mean group and pooled mean group estimators for the dynamic heterogeneous panel.FindingsThe results provide strong statistical evidence that the depth of the financial system in SSA countries is influenced by a combination of local and international stock market indicators. While the local variables exert a positive influence, the global indicator tends to negatively affect the depth of the system, particularly the monetization ratio.Practical implicationsWhile the tendency of portfolio adjustments and reversal can be inferred, the study stresses the need for a more globalized approach to financial policy formulation and implementation even as the trend of global financializaton gets more robust and more profound.Originality/valueThis study is unique in that, unlike prior ones, it has extended the debate on the role of the stock market in financial deepening from a domestic to an international dimension. Financial policy making can be aided by the authors' findings through looking at the financial deepening-stock market linkage from both domestic and globalized perspectives.

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