National Stock Exchanges (NSE) and National Economic Development: A Vector Autoregressive Modelling Approach with Data from Thirty (30) Sub-Saharan Countries (2000-2013)
Journal of World Economic Research
Volume 3, Issue 6, December 2014, Pages: 109-118
Received: Oct. 29, 2014; Accepted: Nov. 15, 2014; Published: Nov. 27, 2014
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Joseph Alimamy Thullah, Lecturer, Department of Economics, Fourah Bay College, USL, Freetown, Sierra Leone; Economist, Ministry of Finance and Economic Development (MoFED), Sierra Leone
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Abstract
Using both Vector Auto Regression (VAR) and Pooled Least Squares Regression (PLSR) analysis, this paper demonstrated the contributions of a formidable National Stock Exchange (NSE) to national economic development, especially in war-affected and disaster-stricken economies in the Sub-Saharan Africa (SSA). A panel data for thirty (30) SSA economies (1981-2012), comprising of selected macroeconomic variables viz: “Gross Domestic Product (LY_GDP), Economy-wide Stock Capitalization (LY_CAPITA) and Economy-Wide Stock Monetization (LY_MONET)” was used to resolve the question “Does a formidable NSE enhance national economic development ?. Whilst the VAR was used to demonstrated co-movement within the short and long-run dependence, the PLSR technique evaluated structural dynamics amongst the variables; Economy-Wide Stock Capitalization (LY_CAPITA), Economy-wide Stock Monetization (LY_MONET) and Economic Growth (LY_GDP). The changes in GDP was proxied national economic development, whilst, the changes in Economy-Wide Stock Capitalization (LY_CAPITA) and Economy-Wide Stock Monetization (LY_MONET) surrogated NSE activities. Both the VAR and PLSR affirmed a positive relationship between economic growth (LY_GDP) and the variables Nation-wide Market Capitalization (LY_CAPITA) and Economy-Wide Stock Monetization (LY_MONET). We therefore imply that, Nation-Wide Market Capitalization (LY_CAPITA) and Economy-Wide Monetization (LY_MONET) contributes to national economic development. Hence, we recommend that the “State” as the frontier pusher in any economy to initiate policies that would identify and promote investors’ base, strengthened regulations, and monitors NSEs development within these economies.
Keywords
National Exchange, Economy-Wide Stock Market Capitalization, Economy-Wide Monetization and National Economic Development, Pooled Least Squares Regression (PLSR) and Vector Auto Regression (VAR).
To cite this article
Joseph Alimamy Thullah, National Stock Exchanges (NSE) and National Economic Development: A Vector Autoregressive Modelling Approach with Data from Thirty (30) Sub-Saharan Countries (2000-2013), Journal of World Economic Research. Vol. 3, No. 6, 2014, pp. 109-118. doi: 10.11648/j.jwer.20140306.15
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