The Impact of Stock Market Development on Economic Growth: Evidence from South Africa

The main objective of this study is to examine the long run relationship between stock market development and economic growth in the case of South Africa. The study used quarterly data covering the period from 1990Q1 to 2010Q4. To empirically test the link between the two variables, the study used the Johnson’s cointegration approach and Granger causality so as to test the direction of the relationship. The Vector Error Correction Model was also employed to capture both short run and long run dynamics. Generally, the results reveal that a long run relationship exists between the two variables and the causality flows from economic growth to stock market development. Also, the extent to which of stock market development impacts on growth is statistically weak