Abstract:
ABSTRACT
There is a raging debate in literature regarding financial market development,
democracy and economic growth nexus. In the Ghanaian context, only the
relationship between financial market and development and economic growth has
been investigated without considering the possible influence of democracy in the
process. The objectives of the study were in three folds: to examine the long and
short run effect of financial market development on economic growth; the long
and short run effect of democracy on economic growth; and the moderating role
of democracy on the financial market development and economic growth nexus in
Ghana. Annual data from 1960 to 2019 was employed and the autoregressive
distributed lag model and the ordinary least sqaure regression were used as the
analytical tools. The study controlled for gross recurrent expenditure, capital, and
labour. The study found that financial market development does not affect
economic growth in the short run but has positive effect on economic growth in
the long run. Also, democracy had a significant positive relationship on economic
growth in both the short run and the long run. There was found the evidence that
democracy moderates the relationship between financial market development and
economic growth. The study among other things recommended that the
government of Ghana should seek to continuously improve the democratic stance
of Ghana so as to affect the financial market and to set the foundation for
productivity and economic activities to thrive.
