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The Impact of Macroeconomic Variables on Capital Market Development in Botswana's Economy

Author

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  • Koketso Molefhi

    (Botswana Institute for Development Policy Analysis)

Abstract

The study examines the impact of macroeconomic variables on stock and bond markets development in Botswana using Autoregressive Distributed Lag (ARDL)-Bounds Test. The results indicate that macroeconomic variables have an impact on capital market development in Botswana. In the short run, real output, money supply and inflation have a positive influence on the development of the stock market, while real exchange rate retards its development. Real output further supports the development of the stock market in the long run. For the bond market, only two variables, inflation rate and lending rate have positive and negative impact on the bond market in the long run respectively, while none of the variables influence the bond market in the short run. Policy implications include increased efforts by policy makers to increase money supply, gross domestic product for the development of stock market, while the bond market development requires a decrease in lending rates.

Suggested Citation

  • Koketso Molefhi, 2019. "The Impact of Macroeconomic Variables on Capital Market Development in Botswana's Economy," Working Papers 62, Botswana Institute for Development Policy Analysis.
    • Handle: RePEc:bid:wpaper:62
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    File URL: http://knowledge.bidpa.bw:8080/xmlui/handle/123456789/97
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    Cited by:

    1. Tshepiso Gaetsewe, 2020. "Characteristics of Firms in Botswana's Informal Economy," Working Papers 74, Botswana Institute for Development Policy Analysis.
    2. Tebogo B. Seleka, 2020. "Targetting Effectiveness of Social Transfer Programs in Botswana:Means-tested versus Categorical and Self-selected instruments," Working Papers 72, Botswana Institute for Development Policy Analysis.

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