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Does Monetary Policy and Foreign Direct Investment Have an Influence on the Performance of Stock Market: Further Empirical Evidence from Ghana

Author

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  • Opoku Adabor

    (Kwame Nkrumah University of Science)

  • Emmanuel Buabeng

    (Kwame Nkrumah University of Science)

Abstract

Monetary policy, foreign direct investment, and the stock market continue to dominate in discussions in developing countries. However, the linkage between the three variables in empirical literature remains unclear. This study aims to test two separate hypotheses: Firstly, the study examines the effects of monetary policy on stock market performance in Ghana. Secondly, the study also empirically investigates the effect of foreign direct investment on stock market performance in Ghana. Autoregressive Distributed Lag (ARDL) model was employed as an estimation strategy to examine the short and long-run effects using annual time series data from 1990 to 2019. The study revealed that monetary policy rate and money supply exerts a statistically significant negative and a positive effect on stock market performance in both the long and short-run in Ghana, respectively. It was also found that foreign direct investment has significant and a positive effect on stock market performance in Ghana in both the long and short run. Total capital stock and volume traded were also found to exert significant positive and negative impacts on stock market performance both in the short and long run respectively. Based on our findings, we recommend that expansionary monetary policy will be a better option to be carried out to improve the stock market performance in Ghana. Furthermore, government and private partnership may ensure the effective management of the macroeconomic variables to attract foreign direct investment into Ghana to boost stock market performance.

Suggested Citation

  • Opoku Adabor & Emmanuel Buabeng, 2020. "Does Monetary Policy and Foreign Direct Investment Have an Influence on the Performance of Stock Market: Further Empirical Evidence from Ghana," Economics Literature, WERI-World Economic Research Institute, vol. 2(2), pages 161-176, December.
    • Handle: RePEc:ana:elitjr:v:2:y:2020:i:2:p:161-176
    DOI: 10.22440/elit.2.2.4
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    References listed on IDEAS

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    Cited by:

    1. Opoku Adabor & Emmanuel Buabeng & Raoul Fani Djomo Choumbou, 2021. "Asymmetrical effect of oil and gas resource rent on economic growth: Empirical evidence from Ghana," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1971355-197, January.
    2. Adabor, Opoku, 2023. "The effect of financial development on natural gas resource rent in Ghana," Resources Policy, Elsevier, vol. 83(C).

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    More about this item

    Keywords

    Stock Market; Monetary Policy; Foreign Direct Investment; ARDL; Ghana;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F10 - International Economics - - Trade - - - General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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