Long Run Determinants of Stock Market Development in Ghana

Abstract

The paper investigates how macro-economic factors affect Stock Market development in Ghana using the Johansen’s co-integration procedure. Quarterly data from 1991 to 2004 was used and the paper made very useful observations. First, the paper finds that gross domestic savings causes stock market development. A related finding is that real income, gross domestic savings, domestic credit to the private sector, and exchange rate predict the long run development of the Ghana Stock Exchange. However, Treasury bill rates have negative impact on the long run development of the GSE. Contrary to expectation, inflation did not prove to be a significant factor in predicting the long run development of the stock market.