Financial Stock Market and Economic Growth in Developing Countries: The Case of Douala Stock Exchange in Cameroon

Abstract

In this article Sims’ causality test based on Granger definition of causality was used to examine causalityrelationships between stock markets and economic growth in Cameroon based on the time series data from 2006to 2010. Our findings suggest that the Douala Stock Exchange still doesn’t affect Cameroonian economic growth.Research has been made in this topic and found positive relationship between financial stock marketdevelopment and economic growth, but in Cameroon the purpose of the government to develop economy, bycreating the Douala Stock Exchange is still not reached. After running variance decomposition test of Cholesky,we found systematic evidence that the market capitalization affects positively the GDP. Our paper comes up withthe opportunity given to the Cameroonian government to understand that it is time to find financial policies, toencourage companies and develop financial stock market culture, and enhance to push companies to initiate IPOinstead of bank loans when money is needed to increase their investment.