Abstract
The research investigated the relationship linking stock market development and economic growth from 1985 to 2018. In measuring growth, Gross domestic product (GDP) was adopted, while stock market was surrogated by turnover ratio, market-capitalization, and value of share- traded, sourced from the Central Bank of Nigeria (CBN) and the Security and Exchange Commission Database. The inclusion of money supply (M3) captured innovation (financial) in the monetary sector. In investigating the aforementioned relationship, the ARDL Bound test methodology was adopted. Empirical results from the investigation confirm the existence of a long-run relationship between stock market development and growth. Similarly, there was a positive relationship between indices of stock market development and growth, albeit statistically insignificant. The study concluded that financial institutions should concentrate on financial innovation in other dimensions in other to boost stock market performance that will result in sustainable growth.
Highlights
As Africa’s financial markets tend towards a higher degree of complexity, the stock markets’ relevance cannot be overemphasized. Shittu (2012) posits that stock markets’ contribute to growth through certain channels such as creation of liquidity, mobilization of savings for private and public sectors, risk diversification, and improved dissemination of information
This study critically investigated the link between stock market development and economic growth in Nigeria for the period, 1985-2018
There have been a number of studies, but a few have been performed on the relationship between stock market development and economic growth has been conducted (Osamwonyi & Kasimu (2013); Edame et al (2013); Echekoba et al (2013); Okoye & Nwisienyi (2013) and Ishioro, 2013) among others and a limited number of others focused on stock market-led growth
Summary
As Africa’s financial markets tend towards a higher degree of complexity, the stock markets’ relevance cannot be overemphasized. Shittu (2012) posits that stock markets’ contribute to growth through certain channels such as creation of liquidity, mobilization of savings for private and public sectors, risk diversification, and improved dissemination of information. Shittu (2012) posits that stock markets’ contribute to growth through certain channels such as creation of liquidity, mobilization of savings for private and public sectors, risk diversification, and improved dissemination of information. The emergence and growth of stock markets have reliably increased over time. Pardy (1992) argued that even in LDCs, capital markets/institutions can mobilize savings (domestic) and distribute funds more efficiently. Amid stock market size and illiquidity, its continuous turn of events and existence may have an expanding impact for growth. In this way, the stock-market can play its principal role in stimulating LDCs growth by attracting and redirecting investment to where it is needed
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