Year: 2020
Type: dissertation
Abstract: This study aims to determine the main drivers of financial market development, with a \nspecific interest in the relationship between the stock and bank credit markets, as proxies \nof financial market development, and the role of institutional quality, in ten African \ncountries for the period of 2009 to 2017. A number of econometric techniques such as \nthe General Methods of Moments (GMM) model for dynamic panel data, autoregressive \ndistribution lag (ARDL) bound testing approach to cointegration, vector error correction \nmodel (VECM), and granger causality tests were applied in the study. We further \ndeveloped a composite index for both financial market development and institutional \nquality using Principal Components Analysis (PCA). The results demonstrate that \ninstitutional quality, as well as infrastructure development, economic growth, and inflation \nare the main determinants of financial market development in our sample of ten African \ncountries. Findings from the ARDL bound testing approach confirm the existence of a \nlong-run association between institutional quality and financial market development. \nAlthough financial market development has no effect on economic growth, institutional \nquality was found to have a positive and highly significant effect on economic growth. \nFurthermore, employing the Granger causality test, we found uni-directional granger \ncausality between financial market development and institutional quality, implying that \nfinancial market development is a significant causal factor for institutional quality. In \nconsideration of these findings, policy formulation by governments should be designed \ntowards enhancing financial and institutional quality development, and this can be \npossibly achieved by effective enforcement of law to encourage compliance, while \nsimultaneously eliminating corruption and other institutional hindrances to development
Author: Violet Madheu
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3125070087