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The limited role of small stock exchanges in economic development: A case study of Mozambique and Swaziland

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  • Bruce Hearn
  • Jenifer Piesse

Abstract

The establishment of a successful stock market in a developing economy can provide a major source of development finance, both channelling domestic savings and attracting foreign investment. But small markets generally fail. Two micro-markets, Mozambique and Swaziland, provide an interesting case study to examine the features of new markets in sub-Saharan Africa that differ in a number of ways, including colonial legacy, membership of the Common Monetary Area and the dynamics of the political economy that defines the links between the citizens, the local elite and the state. In both countries, the operational aspects of the stock exchange are clearly inadequate as a means of promoting international investment. Thus, gains from regional integration initiatives or foreign investment are unlikely, as the market's small size and incomplete institutions currently offer limited potential for either domestic or international risk diversification. However, the political economy in both countries is the real barrier to growth.

Suggested Citation

  • Bruce Hearn & Jenifer Piesse, 2010. "The limited role of small stock exchanges in economic development: A case study of Mozambique and Swaziland," Development Southern Africa, Taylor & Francis Journals, vol. 27(2), pages 205-224.
    • Handle: RePEc:taf:deveza:v:27:y:2010:i:2:p:205-224
    DOI: 10.1080/03768351003740522
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    References listed on IDEAS

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    1. World Bank, 2008. "World Development Indicators 2008," World Bank Publications - Books, The World Bank Group, number 11855.
    2. Ms. Jacqueline T Irving, 2005. "Regional Integration of Stock Exchanges in Eastern and Southern Africa: Progress and Prospects," IMF Working Papers 2005/122, International Monetary Fund.
    3. Charles Komla Adjasi & Charles Amo Yartey, 2007. "Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges," IMF Working Papers 2007/209, International Monetary Fund.
    4. World Bank, 2005. "World Development Indicators 2005," World Bank Publications - Books, The World Bank Group, number 12426.
    5. World Bank, 2005. "World Development Indicators 2005," World Bank Publications - Books, The World Bank Group, number 12425.
    6. World Bank, 2008. "World Development Indicators 2008," World Bank Publications - Books, The World Bank Group, number 28241.
    7. Ms. Iyabo Masha & Mr. Leighton S Harris & Mr. Jian-Ye Wang & Ms. Kazuko Shirono, 2007. "The Common Monetary Area in Southern Africa: Shocks, Adjustment, and Policy Challenges," IMF Working Papers 2007/158, International Monetary Fund.
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    Cited by:

    1. Jenifer Piesse & Bruce Allen Hearn, 2012. "The law of one price: an examination of price integration between Europe and regional markets in Africa," Applied Economics, Taylor & Francis Journals, vol. 44(24), pages 3169-3193, August.

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