Enabling stock market development in Africa: A review of the macroeconomic drivers

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Africa has underdeveloped stock markets that have failed to meet the continent’s capital needs, such as rapid economic growth. This research analyzes the key drivers of stock market development in Africa from a macroeconomic perspective. The study examines several macroeconomic variables, including credit to the private sector, foreign direct investment, external reserves, money supply, external trade, per capita GDP, inflation, and lending rate to explain stock market development in Africa. The study builds a panel data consisting of eight African countries from 1994 to 2018 and applies the pooled mean group estimation technique. The analysis shows that in the long run, credit to the private sector, external reserves, and inflation are the most important factors that influence stock market development, while in the short run, income and trade openness are significant in explaining stock market development in Africa. The study recommends that policies to develop African stock markets should center on developing the private sector through access to credit, increased per capita income, and effective foreign reserve management to boost local and foreign investors’ confidence.

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    • Table 1. Pooled mean group estimator result
    • Table 2. Country-specific pooled mean group estimator short-run result
    • Conceptualization
      Paul Uzum, Ailemen Ochei Ikpefan, Alexander Ehimare Omankhanlen
    • Investigation
      Paul Uzum, Benjamin Ighodalo Ehikioya
    • Validation
      Paul Uzum, Jeremiah Ogaga Ejemeyovwi
    • Writing – original draft
      Paul Uzum
    • Project administration
      Ailemen Ochei Ikpefan, Alexander Ehimare Omankhanlen, Jeremiah Ogaga Ejemeyovwi
    • Supervision
      Ailemen Ochei Ikpefan, Alexander Ehimare Omankhanlen
    • Writing – review & editing
      Ailemen Ochei Ikpefan, Alexander Ehimare Omankhanlen, Jeremiah Ogaga Ejemeyovwi
    • Data curation
      Jeremiah Ogaga Ejemeyovwi
    • Methodology
      Jeremiah Ogaga Ejemeyovwi
    • Software
      Jeremiah Ogaga Ejemeyovwi, Benjamin Ighodalo Ehikioya
    • Visualization
      Jeremiah Ogaga Ejemeyovwi, Benjamin Ighodalo Ehikioya
    • Resources
      Benjamin Ighodalo Ehikioya