Abstract
This study investigates the impact of market-based financial development-specifically proxied by stock value traded-on economic growth across ten selected Sub-Saharan African (SSA) economies (Botswana, Ghana, Kenya, Mauritius, Namibia, Nigeria, South Africa, Eswatini, Zambia, and Zimbabwe) over the period 1995 to 2025. To mitigate business cycle distortions, annual observations were averaged into non-overlapping five-year periods. Methodologically, the study employs second-generation panel unit root tests, Westerlund panel cointegration tests to establish long-run equilibrium relationships, and the System Generalized Method of Moments (System-GMM) dynamic panel estimator to address potential endogeneity and unobserved country-specific effects. The empirical findings confirm the presence of a robust long-run cointegrating relationship among financial development indicators, macroeconomic stability, physical capital accumulation, human capital investment, and economic growth. The System-GMM estimation results reveal that market-based financial development (stock value traded) exerts a positive and statistically significant impact on the growth rate of real gross domestic product per capita across the sampled region. Furthermore, control variables such as gross fixed capital formation, government expenditure on education, and the consumer price index (macroeconomic stability) emerge as crucial determinants of per capita output growth. Based on these findings, the study recommends that monetary authorities and capital market regulators implement policies to enhance stock market liquidity, deepen regional bourses, maintain macroeconomic stability, and prioritise public investments in education and infrastructure to sustain long-term economic prosperity in Sub-Saharan Africa.
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