Abstract:
There is an overgrowing concern of the relevance of financial market
development and economic growth in contemporary times. However, there
still remains an unexplored analysis of the underlying determinants of this
relationship which moderate from forces of portfolio risks and financial
market liberalisation. The study provided insight into financial market
development and economic growth in Sub-Saharan Africa using GMM panel
regression for moderation role and panel seemingly unrelated regression
model for bidirectional estimation and threshold analysis. We considered
impulse response functions to examine adjustment path of growth to shocks.
Using GMM and panel SUR estimations on 34 SSA countries covering 1996-
2016, we found a significant contributing role of industrial production in the
stock market–growth nexus and a downward sensitivity of growth in the
integration of a liberalised money market. Further, the study found optimal
operating thresholds for financial market instruments. The study therefore
advocates that value added from industrial production be allocated to stock
acquisition to ensure growth and prudential regulations be strengthened in
liberalised money market.
