The Causal Effect of Stock Market Development, Financial Sector Reforms and Economic Growth: The Application of Vector Autoregressive and Error Correction Model

Authors

  • Charles O. Manasseh Department of Economics, Coal City University Enugu State Department of Economics, University of Nigeria Nsukka
  • Jonathan E. Ogbuabor
  • Charles N. Anumudu
  • Felicia C. Abada
  • Martins A. Okolie
  • Okoro E. Okoro

Abstract

The study examined the causal relationship between stock market development, financial sector reform and economic growth in Nigeria, using Vector autoregressive and error correction model for the analysis. We observed bidirectional causality between stock market development and economic growth, along with financial sector reform and economic growth. This implies that stock market development and economic growth and; financial sector development and economic growth promote each other. More so, the findings reveal a unidirectional causality running from financial sector reform to stock market development. Hence, there is an evidence of positive long-run relationship between the variables of cointegrating equations. Furthermore, more inquiries on the relationship between business environment, legal framework and stock market development, show a positive long run relationship between the variables of the cointegrating vectors, suggesting that good business environment and quality legal framework could be a prerequisite for stock market development through confidence building and investors protection.

Keywords: Economic Growth, Stock Market Development, Financial Sector Reform

JEL Classifications: G10. EO2, E44

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Author Biography

Charles O. Manasseh, Department of Economics, Coal City University Enugu State Department of Economics, University of Nigeria Nsukka

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Published

2018-04-02

How to Cite

Manasseh, C. O., Ogbuabor, J. E., Anumudu, C. N., Abada, F. C., Okolie, M. A., & Okoro, O. E. (2018). The Causal Effect of Stock Market Development, Financial Sector Reforms and Economic Growth: The Application of Vector Autoregressive and Error Correction Model. International Journal of Economics and Financial Issues, 8(2), 357–369. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/5797

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