Does stock market performance spur economic growth? Empirical evidence from Ghana

Abstract

In this paper, we investigate the relationships between stock market performance and economic growth in Ghana over the period 1991Q1 and 2012Q4 using ARDL procedure for testing cointegration and causality. Unlike previous studies, we employed three proxies of stock market performance, namely: market capitalization ratio, turnover ratio, and total value of shares traded ratio. We also introduced inflation as an intervening variable, in order to avoid the problem of omission-of-variable-bias that has featured most studies. We found a causal flow from economic growth to market capitalization and turnover ratio both in the short run and in the long run. However, we only found a causal flow from economic growth to total value of shares traded ratio in the short run. We recommend that, whilst the implementation of effective strategies would be necessary to attract investors into the stock market, policymakers should undertake growth-enhancing policies in order to spur stock market performance