Stock market performance and economic growth in Ghana

Abstract

This study investigated the relationship between stock market performance and economic growth in Ghana for the period 1991–2014, using quarterly secondary data. The objective was to empirically analyse the relationship between stock market performance and economic growth using Auto regressive Distributed Lag (ARDL) approach.The study found aco integrating relationship between economic growth and its determinants. The regression results show that stock market performance is a very important determinant of economic growth in Ghana since they exerted statistically significant positive effects on economic growth both in the short-run and long run in Ghana.Additionally, consumer price index and interest rate also exerted negative and statistically significant effects on economic growth both in the short-run and long-run in Ghana. Further,real effective exchange rate,physical capital and labour force exerted positive and statistically significant effects on economic growth both in the short-run and long-run in Ghana. It is therefore recommended that policy makers specifically of Ghana Stock Exchange should put pragmatic measures to improve the performance of the stock market, increase physical capital, and labour force,as well as maintaining low inflationary rate. Finally, Bank of Ghana should maintain a stable exchange rate while financial institutions are to reduce their interest rate on lending.