Financial Markets Development and Macroeconomic Stability in Africa

The book examines the impact of financial markets development on macroeconomic stability. It also examines the relationship between financial markets indicators (ratios of broad money supply to GDP private sector credit to GDP total bank credit to GDP and market capitalization to GDP) and macroeconomic variables (inflation employment and poverty rates) in Sub-Sahara Africa. It adopts both analytical and econometric techniques such as ordinary least squares method granger causality test Johansen’s co-integration techniques and vector error correction model for the analysis. Evidence from the study reveals that a long-run relationship exists between financial markets indicators and macroeconomic variables. It was also discovered that financial markets indicators have positive and significant impact on economic growth in countries with largely developed financial markets while financial markets indicators have insignificant impact on economic growth in countries with minimally developed financial markets. It was also revealed that causality runs from financial markets indicators to macroeconomic variables.It made some recommendations based on the findings.