Author
Listed:
- Richard Eshun
- George Tweneboah
Abstract
This study aims to establish whether the effect of stock market development on the growth of economies in the Economic Community of West African States (ECOWAS) is conditioned by institutional quality threshold. To this end, we used the Hansen threshold estimation approach to assess any discontinuities in this relationship. Data are sourced from the World Development Indicators of the World Bank and cover the period from 2000–2020. We significantly contribute to the literature by examining the nonlinearities in the stock market development-growth nexus when institutional quality is the mediating variable. We established that, as long as institutional quality is below the threshold level, it serves as an impediment for financial markets to drive growth in the West African sub-region. A key implication is that the relationship between stock market development and economic growth in the West African sub-region is contemporaneous, and that the development of the stock market is relevant in the developmental agenda in the sub-region. Therefore, we recommend that at the policy level, countries in West Africa should design strategies that can improve their institutional structures in the areas of allocation of credit, increasing competition, and the implementation of proper regulations that will make it possible for financial markets to stimulate economic growth, as these seem to be important condition to drive growth in the long run.Improving the financial sector is important to guarantee the sustainability of economic growth. This is not different from the Economic Community of West African States (ECOWAS). Regional blocs seek to accomplish this by developing robust and sound stock markets within a solid and healthy institutional framework. This study examines the effect of stock market developments under a strong institutional framework on the economic output of the ECOWAS region. The results show that a robust stock markets and ensuring more credit to the private sector can only improve the gross domestic product of ECOWAS member countries when there is a good institutional quality structure in place. This is crucial for ECOWAS member countries experiencing low manufacturing sector output. Robust institutional quality structures and enhanced credit to the private sector must be continually pursued by the ECOWAS to engender the growth of member economies.
Suggested Citation
Richard Eshun & George Tweneboah, 2024.
"Effects of stock market development on economic growth in ECOWAS: does institutional quality matter?,"
Cogent Economics & Finance, Taylor & Francis Journals, vol. 12(1), pages 2374419-237, December.
Handle:
RePEc:taf:oaefxx:v:12:y:2024:i:1:p:2374419
DOI: 10.1080/23322039.2024.2374419
Download full text from publisher
As the access to this document is restricted, you may want to search for a different version of it.
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:oaefxx:v:12:y:2024:i:1:p:2374419. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
We have no bibliographic references for this item. You can help adding them by using this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/OAEF20 .
Please note that corrections may take a couple of weeks to filter through
the various RePEc services.