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Banks, stock market development and economic growth in South Africa: a multivariate causal linkage

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  • Sheilla Nyasha
  • Odhiambo

Abstract

This article investigates the dynamic causal relationship between bank-based financial development, stock market development and economic growth in South Africa - during the period 1980-2012. The study includes savings and investment as intermittent variables - thereby creating a multivariate Granger-causality model. Using the newly developed autoregressive distributed lag (ARDL)-bounds testing approach, the empirical results of this study reveal that there is a distinct short- and long-run unidirectional causal flow from stock market development to economic growth in South Africa. The results also indicate that there is a unidirectional causal flow from bank-based financial development to stock market development in the short run. The study, however, fails to find any causality between bank-based financial development and economic growth. The study, therefore, concludes that the development of the real sector in South Africa is largely driven by stock market development.

Suggested Citation

  • Sheilla Nyasha & Odhiambo, 2015. "Banks, stock market development and economic growth in South Africa: a multivariate causal linkage," Applied Economics Letters, Taylor & Francis Journals, vol. 22(18), pages 1480-1485, December.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:18:p:1480-1485
    DOI: 10.1080/13504851.2015.1042132
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    Cited by:

    1. Andrew Phiri, 2018. "Has the South African Reserve Bank responded to equity returns since the sub-prime crisis? An asymmetric convergence approach," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 10(3), pages 205-225.
    2. Muyambiri Brian & Odhiambo Nicholas M., 2018. "Financial Development and Investment in Botswana: A Multivariate Causality Test," Folia Oeconomica Stetinensia, Sciendo, vol. 18(2), pages 72-89, December.
    3. Erasmus L. Owusu, 2021. "The relationship between foreign direct investment and economic growth: A multivariate causality approach from Namibia," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2990-2997, April.
    4. Andrew Phiri, 2017. "The Unemployment-Stock Market Relationship in South Africa: Evidence from Symmetric and Asymmetric Cointegration Models," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 15(3 (Fall)), pages 231-254.
    5. Brian Muyambiri & Nicholas Odhiambo, 2017. "Financial Development, Savings and Investment in South Africa: A Dynamic Causality Test," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 17(3), pages 1-10, September.
    6. Yilmaz Bayar, 2016. "Institutional Determinants of Stock Market Development in European Union Transition Economies," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 19(61), pages 211-226, September.
    7. Nicholas M. Odhiambo & Sheilla Nyasha, 2022. "Financial Development and Economic Growth in Uganda: A Multivariate Causal Linkage," Journal of African Business, Taylor & Francis Journals, vol. 23(2), pages 361-379, April.
    8. Brian Muyambiri & John-Baptiste Mabejane, 2023. "The Nexus Of External Debt, Private Investment And Financial Development: Evidence From Selected Sacu Countries," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 21(1), pages 25-40, May.
    9. Nyasha, Sheilla & Odhiambo, Nicholas M, 2019. "Does remittance inflow granger-cause economic growth in South Africa? A dynamic multivariate causality test," Working Papers 25743, University of South Africa, Department of Economics.
    10. Yilmaz Bayar, 2017. "Public Governance And Financial Development In Central And Eastern European Countries," Ekonomske ideje i praksa, Faculty of Economics and Business, University of Belgrade, issue 24, pages 53-65, March.
    11. Maku Affor Owen, 2020. "Stock Market Development and Economic Growth: Empirical Evidence From an Institutional Impaired Economy," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 496-509, October.
    12. Muhammad Atif Khan & Muhammad Asif Khan & Kishwar Ali & József Popp & Judit Oláh, 2020. "Natural Resource Rent and Finance: The Moderation Role of Institutions," Sustainability, MDPI, vol. 12(9), pages 1-23, May.
    13. Md. Qamruzzaman & Jianguo Wei, 2018. "Financial Innovation, Stock Market Development, and Economic Growth: An Application of ARDL Model," IJFS, MDPI, vol. 6(3), pages 1-30, August.

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